CBSE Class 12 Accountancy Company Accounts Share Capital Assignment

LEARNING OBJECTIVES

Understand the meaning and features of company

I) Classification of share capital

II) Understand the accounting treatment of over subscription, calls in arrears, premium and discount on issue of shares.

III) Understand the meaning of forfeiture of shares

IV) Pass journal entries regarding forfeiture and reissue of shares

V) Calculate capital reserve

VI) Differentiate between capital reserve and reserve capital

VII)Understand the disclosure of the share capital in the balance sheet

(1 marks)

Q.1 Give the definition of a compnay as contained in the companies act,1956.

Ans section 3(1)(i) of companies act defines a company as "a company formed and registered under this act or an existing company." According to sec3(1)(ii),"An exisiting company means a company formed and registered under any of the former companies Acts."

Q.2 Can forfeited shares be issued at a discount ? If so to what extent?

Ans Re-issue of forfeited shares: Forfeited shares can be reissued at a discount. However, the In other words, amount received on received on re-issue plus amount already received on forfeited shares must not be less than the paid up value of shares.

Q.3 As a director of a company you had invited applications for 20,000 equity shares of Rs.10 each at a premium of Rs.2 each. The total applications money received at Rs.3/- per share was Rs.72,000. Name the kind of subscription. List the three alternatives for allotting these share.

Ans It is a case of over-subscription. Shares are said to be over-subscribed when the numbers of shares ar more than the number of shares offered:

       (i) Allotment for 1st 20,000 shares and the rest can rejected

       (ii) Allotment on prorata basis

       (iii)Allotment of some application in full and some on prorata basis,and some refused.

Q.4 What is an Escrow Account?

Ans. In order to fulfill certain obligations under the scheme of buy-back of securities an account is opened, which is known as escrow account.

Q.5 What do you mean by Private placement of shares?

Ans. Private Placement of shares implies issue and allotment of shares to a selected groups of persons privately and not to public in general through public issue. In order to place the shares privately, a company must pass a special resolution to this effect.

Q.6 What is Sweat Equity?

Ans. Sweat Equity shares means easily shares issued by the company to its employees or whole time directors at a discount or for consideration other then cash for providing know - how or making available right in the nature of intellectual properly rights or valve addition by whatever name called.

Q.7 What maximum amount of discount can be allowed on the reissue of forfeited shares?

Ans. The maximum amount of discount on reissue of forfeited shares is that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares on their original issue and that the discount allowed on re issue of forfeited shares should be debited to the share forfeited account.

Q.8 State in brief, the SEBI Guidelines regarding Debenture Redemption Reserve.

Ans. At per SEBI Guidelines, an amount equal to 50% of the debenture issue must be transferred to DRR before the redemption begins. In other words, before redemption, at least an amount equal to 50% of the debenture issue must stand to the credit of DRR

Q.9 Name the head under which discount on issue of debentures appears in the Balance Sheet of "C" Company.

Ans. Discount on issue of debentures will appear under the heading Miscellaneous Expenditure.  

Q.10 Can a company issue share of discount ? What conditions must a company comply with before the issue of such shares.

Ans. Section 79 of the companies Act, 1956 permits a company to issue shares at a discount only if the following conditions are fulfilled :

        1) The shares are of a class already issued.

        2) At least one year must have elapsed since the company become entitled to commence business.

        3) The issue of shares at discount is authorised by a revolution passed by the company in its general meeting and sanctioned by the central Government. The resolution specifies the maximum rate of discount at which the shares are to be issued. The rate must not exceed 10% unless sanctioned by the central Government.

Important Concepts

1. A share is one of a finite number of portions in the capital of a company.

2. The person who subscribes in shares is called a share holder.

3. Dividend is the profit which the company distributes to the share holders at the end of the financial year.

4. Nominal Value (N.V) or face value (F.V) is the original value of the share.

5. Market Value (M.V) is the price at which the share is quoted in the market.

6. If the market value of a share is the same as its nominal value, the share is said to be at par.

7. A share is said to be above par or at premium, if its market value is more than its face value.

8. A share is said to be below par or at a discount, if its market value is less than its face value.

9. The profit, which a share-holder gets from his investment in the company is called dividend.

10. The dividend is always calculated on the face value and not on the market value.

11. The dividend is expressed as a percentage of the nominal value of the share.

12. The shares are generally of two types:
i. Preferred shares
ii. Common or ordinary shares

Important Formulae’s

1. Investment= Number of shares x Market Value of 1 share

2. Number of shares bought = Sum invested/M.V of 1 share

3. Number of shares bought = Total dividend/Dividend on 1 share

4. Number of shares bought = Total Income/Income on 1 share

5. Income = Number of shares × rate of dividend × F.V

6. F.V. = Face-value=Nominal-value=N.V.

7. Return %=Income Profit %

Question. Reserve share capital means :
(a) Part of authorised capital to be called at the beginning
(b) Portion of uncalled capital to be called only at liquidation
(c) Over subscribed capital
(d) Under subscribed capital
Answer: (b) Portion of uncalled capital to be called only at liquidation

Question. When full amount is due on any call but it is not received, then the short fall is debited to :
(a) Calls-in-advance
(b) Calls-in-arrear
(c) Share Capital
(d) Suspense Account
Answer: (b) Calls-in-arrear

Question. The difference between subscribed capital and called up capital is called :
(a) Calls-in-arear
(b) Calls-in-advance
(c) Uncalled capital
(d) None of these
Answer: (c) Uncalled capital

Question. Which statement is issued before the issue of shares ?
(a) Prospectus
(b) Articles of Association
(c) Memorandum of Association
(d) All of these
Answer: (d) All of these

Question. Company can utilise securities premium for :
(a) Writing off loss incurred on revaluation of asset
(b) Issuing fully paid bonus shares
(c) Paying divided
(d) Writing off trading loss
Answer: (b) Issuing fully paid bonus shares

Question. When a company issues fully paid shares to promoters for their services, the journal entry will be:
(a) Bank A/c Dr.
To Share Capital A/c
(b) Goodwill A/c Dr.
To Share Capital A/c
(c) Promoters Personal A/c Dr.
To Share Capital A/c
(d) Promotion Expenses A/c Dr.
To Share Capital A/c
Answer: (b) Goodwill A/c Dr. To Share Capital A/c

Question. When a company issues shares at a premium, amount of premium may be received by the company :
(a) Along with application money
(b) Along with application money
(c) Along with calls
(d) Along with any of the above
Answer: (d) Along with any of the above

Question. Share Application Account is :
(a) Personal Account
(b) Real Account
(c) Nominal/ Account
(d) None of these
Answer: (a) Personal Account

Question. Securities Premium can not be applied :
(a) For paying dividend to members
(b) For issuing bonus shares to members
(c) For writing off preliminary expenses of company
(d) For writing off discount on issue of debentures
Answer: (a) For paying dividend to members

Question. A joint stock company is :
(a) An artificial legal person
(b) Natural person
(c) A general person
(d) None of these
Answer: (a) An artificial legal person

Question. Equity shareholders are :
(a) Customers
(b) Creditors
(c) Debtors
(d) Owners
Answer: (d) Owners

Question. Reserve capital means :
(a) A part of subscribed uncalled capital
(b) Reserve Profit
(c) A part of Capital Reserve
(d) A part of Capital Redemption Reserve
Answer: (a) A part of subscribed uncalled capital

Question. Securities Premium is shown under which head in the Balance Sheet ?
(a) Reserve and Surplus
(b) Miscellaneous Expenditure
(c) Current Liabilities
(d) Share Capital
Answer: (a) Reserve and Surplus

Question. Shares may be issued :
(a) At par value
(b) At Premium
(c) At Discount
(d) Both (a) & (b)
Answer: (d) Both (a) & (b)

Question. Capital included in the liabilities of a company is called :
(a) Authorised Capital
(b) Issued Capital
(c) Subscribed Capital
(d) Paid-up Capital
Answer: (d) Paid-up Capital

Question. An issue of shares which is not a public issue but offered to a selected group of persons is called :
(a) Public offer
(b) Private placement of shares
(c) Initial public offer
(d) None of these
Answer: (d) None of these

Question. If a share of ₹ 10 on which ₹ 8 has been called and ₹ 6 is paid is forfeited, the Share Capital Account should be debited with :
(a) ₹ 8
(b) ₹ 10
(c) ₹ 6
(d) ₹ 2
Answer: (a) ₹ 8

Question. When shares are forfeited, the Share Capital Account is debited with:
(a) Nominal value of Shares
(b) Market value of Shares
(c) Called-up value of Shares
(d) Paid-up value of Shares
Answer: (c) Called-up value of Shares

Question. If the loss on reissue of shares is less than the amount forfeited, the ‘surplus’ or profit is transferred to :
(a) Capital Reserve
(b) Revenue Reserve
(c) Profit & Loss A/c
(d) None of these
Answer: (a) Capital Reserve

Question. J. Ltd. re-issue 2,000 shares which where forfeited by crediting share forfeiture account by ₹ 3,000. These shares were re-issued at ₹ 9 per share. The amount transferred to capital reserve will be :
(a) ₹ 3,000
(b) ₹ 2,000
(c) ₹ 1000
(d) Nil
Answer: (c) ₹ 1000

Question. If a share of ₹ 10 on which ₹ 8 has been paid up is forfeited, it can be reissued at the minimum price of…….
(a) 10 Rs. per share
(b) 8 Rs. per share
(c) 5 Rs. per share
(d) 2 Rs. per share
Answer: (d) 2 Rs. per share

Question. Z & Co. forfeited 100 shares of 10 Rs. each for non-payment of final call of 2 Rs. per share. All the forfeited shares were re-issued at 9 Rs. per share. What amount will be transferred to Capital Reserve A/c ?
(a) 700 Rs.
(b) 800 Rs.
(c) 900 Rs.
(d) 1,000 Rs.
Answer: (a) 700 Rs.

Question. Forfeiture of shares results in the reduction of:
(a) Paid-up Capital
(b) Authorised Capital
(c) Fixed Assets
(d) Reserve Capital
Answer: (a) Paid-up Capital

Question. Amount of calls in Arrear is :
(a) Added to capital
(b) Deducted from share capital
(c) Shown on the assets side
(d) Shown on the equity and liability side
Answer: (b) Deducted from share capital

Question. Discount allowed on reissue of forfeited shares is debited to:
(a) Share Capital A/c
(b) Share Forfeiture A/c
(c) Profit & Loss A/c
(d) General Reserve A/c
Answer: (b) Share Forfeiture A/c

Question. A company has…………
(a) Separate Legal Entity
(b) Perpetual Existence
(c) Limited Liability
(d) All the above
Answer: (d) All the above

Question. The liability of members in a company is :
(a) Limited
(b) Unlimited
(c) Stable
(d) Fluctuating
Answer: (a) Limited

Question. Equity shareholders are :
(a) Creditors of the company
(b) Owners of the company
(c) Customers of the company
(d) None of these
Answer: (b) Owners of the company

Question. Balance of Forfeited Shares Account after reissue of forfeited shares is transferred to :
(a) Profit & Loss A/c
(b) Capital Reserve Account
(c) General Reserve Account
(d) None of these
Answer: (b) Capital Reserve Account

Question. Under the provisions of Companies Act, company can issue:
(a) Only equity shares
(b) Only preference shares
(c) Preference shares and equity shares
(d) None of these
Answer: (c) Preference shares and equity shares

Question. Reight shares are the shares, which :
(a) Are issued to the Direction of the company
(b) Are issued to existing shareholders of the company
(c) Are issued to promoters in consideration of their services
(d) Are issued to the vendors for purchasing assets
Answer: (b) Are issued to existing shareholders of the company

Question. Total amount of liabilities side includes :
(a) Authorised Capital
(b) Issued Capital
(c) Subscribed Capital
(d) Paid-up Capital
Answer: (d) Paid-up Capital

Question. A company issues its shares at premium under which Section of Indian Companies Act, 2013 ?
(a) 78
(b) 79
(c) 52
(d) 53
Answer: (c) 52

Question. Shares can be forfeited :
(a) For failure to attend meetings
(b) For non-payment of call money
(c) For failure to repay the loan to the Bank
(d) For which shares are pledged as a security
Answer: (b) For non-payment of call money

Question. Shareholders get:
(a) Interest
(b) Dividend
(c) Commission
(d) Profit
Answer: (b) Dividend

Question. According to Table E of the Companies Act, 2013 interest on calls in arrears charged should not exceed :
(a) 5% p.a.
(b) 6% p.a.
(c) 8% p.a.
(d) 10%p.a.
Answer: (d) 10%p.a.

Question. Premium on issue of shares is a :
(a) Capital Gain
(b) Capital Loss
(c) General Profit
(d) General Loss
Answer: (a) Capital Gain

Question. Premium on issue of shares is shown on which side of the Balance sheet.
(a) Assets
(b) Liabilities
(c) Both
(d) None of these
Answer: (b) Liabilities

Question. Share Allotment Account is :
(a) Personal A/c
(b) Real A/c
(c) Nominal A/c
(d) None of these
Answer: (a) Personal A/c

Question. The portion of the authorised capital which can be called-up only on the liquidation of the company is called:
(a) Issued Capital
(b) Called-up Capital
(c) Uncalled Capital
(d) Reserve Capital
Answer: (d) Reserve Capital

Question. Premium on issue of shares can be used for :
(a) Issue of Bonus shares
(b) Distribution of Profit
(c) Transferring to General Reserve
(d) All these
Answer: (a) Issue of Bonus shares

Question. If equity share of ₹ 10 Rs. each is issued at ₹ 12 each, it is called:
(a) Issued at Par
(b) Issued at Premium
(c) Issued at Discount
(d) None of these
Answer: (b) Issued at Premium

Question. The maximum capital beyond which a company is not allowed to raise funds, by issue of shares is called …………..
(a) Issued capital
(b) Reserve capital
(c) Authorised capital
(d) Subscribed capital
Answer: (b) Reserve capital

Question. As per Table F the maximum rate of interest on calls in advance paid is:
(a) 8% p.a.
(b) 12% p.a.
(c) 5 % p.a.
(d) None of these
Answer: (b) 12% p.a.

Question. As per the Companies Act, only preference shares, which are redeemable within …………. can be issued.
(a) 24 years
(b) 22 years
(c) 30 years
(d) 20 years
Answer: (d) 20 years

Question. Which one of the following is the registered capital of the company ?
(a) Paid-up capital
(b) Uncalled capital
(c) Authorised capital
(d) Issued capital
Answer: (c) Authorised capital

Question. Dividends are usually paid on :
(a) Authorised Capital
(b) Issued Capital
(c) Called-up Capital
(d) Paid-up Capital
Answer: (d) Paid-up Capital

Question. If vendors are issued fully paid shares of ₹ 1,00,000 in consideration of net assets of ₹ 1,20,000 the balance of ₹ 20,000 will be credited to :
(a) Goodwill Account
(b) Capital Reserve Account
(c) Vendor’s Account
(d) Profit & Loss Account
Answer: (b) Capital Reserve Account

Question. Which account should be debited when shows an issued to promoters:
(a) Share Capital A/c
(b) Assets A/c
(c) Promoter’s A/c
(d) Goodwill A/c
Answer: (d) Goodwill A/c

Question. According to Section 52 of the Compaines Act, the amount in the Securities Premium Account cannot be used for the purpose of:
(a) Issue of fully Paid Bonus Shares
(b) Writing Off Losses of the Company
(c) Writing off Preliminary Expenses
(d) Writing Off Commission or Discount on Issue of Shares
Answer: (b) Writing Off Losses of the Company

Question. 10,000 equity shares of 10 Rs. each were issued to public at a premium of ₹ 2 per share payable on allotment. Applications were received for ₹ 12,000 shares. Amount of securities premium account will be :
(a) ₹ 20,000
(b) ₹ 24,000
(c) ₹ 4,000
(d) ₹ 1,600
Answer: (a) ₹ 20,000

Question. A Ltd. purchased a machinery for 1,80,000Rs. for which it is paying by issue of shares of 100 Rs. each at 20% premium. How many shares will be issued as consideration. ?
(a) 2,500
(b) 2,000
(c) 1,500
(d) 3,000
Answer: (c) 1,500

Question. Right Shares are issued to :
(a) Promoters for the Services
(b) Holders of Convertible Debentures
(c) Existing Shareholders
(d) All of the above
Answer: (c) Existing Shareholders

Question. A company is registered with a share capital of ₹ 1,00,000Rs. divided into ₹ 10,000 shares of ₹ 10 each. Of these shares 9,990 shares are held by Rajeev and 10 Shares are held by Sanjay. In the eye of law it is treated as:
(a) Partnership
(b) Private Company
(c) Public Compancy
(d) Government Company
Answer: (b) Private Company

Question. Which of the following should be deducted from the called-up capital to find out paid up capital:
(a) Calls-in-advance
(b) Calls-in-arrear
(c) Share forfeiture
(d) Discount on issue of shares
Answer: (b) Calls-in-arrear

Question 1. Excess money gotten with applications was adjusted towards sums due on allotment and calls. Namita, a shareholder of Category I, holding 3,000 shares failed to pay the allotment money. Her shares were forfeited immediately after allotment. Manav, a shareholder of Category II, who applied for 1,000 shares failed to pay the first and final call. His shares were also forfeited. All the forfeited shares were re-issued at Rs 60 per share fully paid up. Pass necessary journal entries and prepare Cash Book for the above transactions in the books of Sunstar Ltd.
Answer: Books of Sunstar Ltd. Journal

Cash Book (Bank Column Only)

In simple words: When shareholders do not pay the money they owe, their shares get taken back by the company. The company then resells these shares for money. The extra cash gained from selling these used shares at a higher price goes into a special reserve account. The journal entries record each step - when money comes in from applications, when allotments happen, when calls are made, when shares are forfeited, and when those forfeited shares are reissued.

Exam Tip: Always separate application money adjustment, allotment entries, call entries, and forfeiture entries into distinct journal lines. Track forfeited shares carefully - they must be credited from Capital and Call accounts at book value, then the gain on re-issue goes to Capital Reserve, never to profit.

Question 2. Megha Ltd. invited applications for issuing 90,000 equity shares of Rs 100 each at a premium of Rs 60 per share. The amount was payable as follows: On Application - Rs 30 per share (including premium Rs 10), On Allotment - Rs 70 per share (including premium Rs 50), On First and Final Call - Balance amount. Applications for 1,00,000 shares were received. Shares were allotted on pro-rata basis to all the applicants. Excess money received with application was adjusted towards sums due on allotment. Sudha, a shareholder holding 4,500 shares, failed to pay the allotment money. Her shares were forfeited immediately after allotment. Afterwards the first and final call was made. Rajat, a holder of 3,600 shares, failed to pay the first and final call. His shares were also forfeited. All the forfeited shares were re-issued for Rs 90 per share fully paid up.
Answer: Books of Megha Ltd. Journal

Cash Book (Bank Column Only)

In simple words: The company gets money from share applications and adjusts extra money towards what is owed for allotments. When some shareholders fail to pay, the company takes their shares back. These shares are then sold again for more money. The extra profit from reselling these taken-back shares is moved into a special capital reserve account. Each type of money coming in - application, allotment, and calls - gets recorded separately in the journal.

Exam Tip: Remember to calculate pro-rata allotment accurately before figuring out excess application money to adjust. When shares are forfeited and re-issued, the loss or gain is the difference between re-issue price and book value - this goes to Capital Reserve, not profit and loss.

Question 3. Denspar Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each at a premium of Rs 20 per share. The amount was payable as follows: On Application - Rs 2 per share, On Allotment - Rs 13 per share (including Rs 10 premium), On First Call - Rs 7 per share (including Rs 5 premium), On Final Call - Rs 8 per share (including Rs 5 premium). Applications for 1,80,000 shares were received. Shares were allotted to all the applicants. Yogesh, a shareholder holding 5,000 shares paid his entire share money along with the allotment money. Yashesh, a holder of 7,000 shares, failed to pay the allotment money. Afterwards the first call was made. Vishesh paid the allotment money along with the first call money. Samyesh, holding 2,000 shares did not pay the final call. Samyesh's shares were forfeited immediately after the final call. Out of the forfeited shares, 1,500 shares were re-issued at Rs 8 per share fully paid up.
Answer: In the books of Denspar Ltd. Journal

Working Notes: (i) Calls-in-advance: on First Call (5,000 x Rs 7) = Rs 35,000; on Final Call (5,000 x Rs 8) = Rs 40,000; Total = Rs 75,000 (ii) Share Final call due = Rs 14,40,000; Less: calls-in-advance = Rs 40,000; Balance = Rs 14,00,000
In simple words: The company receives money from shareholders in several stages - first on application, then on allotment, then on first call, and finally on the final call. Some shareholders may pay early or late, which creates situations where money comes in advance or is owed as arrears. When some shareholders do not pay at the final stage, their shares get taken back. These taken-back shares are resold, and any extra money from reselling them goes into a capital reserve account.

Exam Tip: Track calls-in-advance and calls-in-arrears carefully - they directly affect the cash received and amounts owed in each journal entry. When recording forfeiture, credit both Capital and Premium Reserve accounts based on the amounts originally collected, then debit the Share Forfeiture account.

Question 1. Willow Ltd. was registered with an authorised capital of Rs 10,00,000 divided into 1,00,000 equity shares of Rs 10 each. The company offered 80,000 shares for subscription to the public, out of which 75,000 shares were subscribed. All amounts were received except the final call of Rs 2 per share on 8,000 shares. Fill in the missing figures in the Balance Sheet of Willow Ltd. as per the provisions of Schedule III, Part I of the Companies Act, 2013.

Answer: The missing figures in the Balance Sheet of Willow Ltd. are calculated as follows:

Authorised Capital:
1,00,000 equity shares @ Rs 10 each = Rs 10,00,000

Issued Capital:
80,000 equity shares @ Rs 10 each = Rs 8,00,000

Subscribed Capital:
Subscribed and fully paid:
72,000 equity shares of Rs 10 each = Rs 7,20,000

Subscribed but not fully paid:
3,000 equity shares of Rs 10 each = Rs 30,000
Less: Calls-in-Arrears = Rs (6,000)

Total Share Capital = Rs 7,44,000

In simple words: The company had authority to issue 10 lakh rupees in shares. It actually issued 8 lakh rupees in shares. Out of these, 7,20,000 rupees came fully paid, and 30,000 rupees were partly paid but only 24,000 rupees were actually collected. So the total share capital shown in the balance sheet is 7,44,000 rupees.

Exam Tip: Always separate authorized, issued, and subscribed capital. Calls-in-Arrears reduce the subscribed but not fully paid amount shown in the balance sheet.

Question 2. Complete the following Journal entries: In the Books of Madhav Ltd.
Answer:

The completed journal entries in the books of Madhav Ltd. are as follows:
 

In simple words: When Madhav Ltd. bought a business from Gupta Brothers, it got assets (plant, vehicles, stock, machinery) and owed money to suppliers and the seller. The company recorded these assets on the debit side and the liabilities on the credit side. It also issued shares to pay part of what it owed to Gupta Brothers.

Exam Tip: When recording a business purchase, debit all assets received and credit all liabilities assumed, along with any new shares or capital issued as payment.

Question 3. GG Ltd. had issued 50,000 equity shares of Rs 10 each at a premium of Rs 2 per share payable with application money. The incomplete journal entries related to the issue are given below. You are required to complete these blanks.
Answer:

The completed journal entries in the books of GG Ltd. are as follows:
 

In simple words: When GG Ltd. issued shares, it received money in stages - first on application, then on allotment, and finally on call. Some shareholders did not pay on time, so their shares were cancelled. When the company reissued these cancelled shares at a higher price, it made a gain which was transferred to the capital reserve.

Exam Tip: Always separate application money, allotment money, and call money. When shares are forfeited and reissued, the gain or loss must be transferred to the Capital Reserve or Profit and Loss account respectively.

Question 4. XLY Ltd. issued 10,000 equity shares at Rs 10 per share. It also issued 2,000 shares to its promoters. You are required to complete the following incomplete information in the journal of XLY Ltd.
Answer:

The completed journal entries in the books of XLY Ltd. are as follows:
 

In simple words: XLY Ltd. collected money from the public in stages - application first, then allotment, then calls. It also gave free fully paid shares to the people who helped set up the company. Each stage of money collection needed a separate journal entry to track the different types of share capital.

Exam Tip: When shares are issued to promoters for free or as consideration for incorporating the company, they are shown as fully paid without any calls. Each call must be recorded separately as it becomes due.

Question 5. You are required to complete the following incomplete journal entries related to forfeiture of shares originally issued at premium.
Answer:

The completed journal entries related to forfeiture of shares originally issued at premium are as follows:
 

In simple words: When shares with a premium are forfeited, you must cancel both the share capital amount and the premium amount. If you later reissue the shares at a higher price, the gain made is transferred to the appropriate reserve account.

Exam Tip: When forfeiting shares issued at premium, debit both Share Capital and Securities Premium separately. The premium component must be calculated on the amount that was unpaid at the time of forfeiture.

Question 1. Give the meaning of 'called-up capital'.
Answer: Called-up capital refers to the amount of capital that has been asked for or demanded from shareholders by the company. It is the portion of the issued capital that the company has called upon shareholders to pay. Called-up capital is less than or equal to issued capital but may be more than paid-up capital.

Exam Tip: Remember that called-up capital is the amount the company has demanded payment for, not necessarily what has been received.

Question 2. What is meant by 'Minimum Subscription'?
Answer: Minimum Subscription is the least amount of capital that must be raised by a company before it can begin business operations. It is the minimum amount that needs to be received as application money before shares can be allotted. The company cannot start its business until this minimum amount is secured from applicants.

Exam Tip: Minimum Subscription is a legal requirement that safeguards the company and protects investor interests before business begins.

Question 3. Can 'Securities Premium Reserve' be used as working capital? Give reason in support of your answer.
Answer: No, Securities Premium Reserve cannot be used as working capital. According to Section 63 of the Companies Act, the Securities Premium Reserve is restricted in its use. It can only be used for specific purposes such as issuing fully paid bonus shares, writing off preliminary expenses, or buying back shares. It cannot be used as working capital because it is a capital reserve and must be maintained for long-term purposes only, not for day-to-day operations.

Exam Tip: Always recall that capital reserves have restricted uses defined by law and cannot be freely used for working capital needs.

Question 4. What is meant by 'oversubscription of shares'?
Answer: Oversubscription of shares happens when the number of shares applied for by the public exceeds the number of shares offered by the company for subscription. In other words, applications for shares are greater than the number of shares made available. In such situations, the company gets to choose which applications to accept and which to reject.

Exam Tip: When a company faces oversubscription, it is usually a sign of investor confidence and popularity of the company's shares.

Question 5. What is 'private placement of shares'?
Answer: Private placement of shares is a method of issuing shares directly to a selected group of investors without making a public offer. The shares are allotted to specific people or institutions chosen by the company, rather than being offered to the public through a prospectus. This method avoids the lengthy process of public subscription and allows the company to raise capital quickly from identified investors.

Exam Tip: Private placement is faster and easier than public issue but is restricted to selected investors only.

Question 6. Z Ltd. forfeited 1,000 equity shares of Rs 10 each for the non-payment of the first call of Rs 2 per share. The final call of Rs 3 per share was yet to be made. Calculate the maximum amount of discount at which these shares can be reissued.
Answer: To find the maximum discount for reissue:
Nominal value of share = Rs 10
Amount received on forfeited shares = Application (Rs 2) + Allotment (Rs 2) = Rs 4 per share
Amount due on forfeited shares = First call (Rs 2) + Final call (Rs 3) = Rs 5 per share
Maximum discount = Amount due on forfeited shares = Rs 5 per share
Total maximum discount = Rs 5 × 1,000 shares = Rs 5,000

Exam Tip: The maximum discount for reissuing forfeited shares equals the total amount that was due but not received at the time of forfeiture.

Question 7. On 28th Feb., 2016 the first call of Rs 2 per share became due on 50,000 equity shares allotted by Kumar Ltd. Komal a holder of 1,000 shares did not pay the first call money. Kovil a holder of 750 shares paid the second and final call of Rs 4 per share along with the first call. Pass the necessary journal entry for the amount received by opening Calls-in-Arrears and Calls-in-Advance account in the books of the company.
Answer:
Dr. Bank A/c Rs 1,01,000
Cr. Equity Share First Call A/c Rs 1,00,000
Cr. Calls-in-Advance A/c Rs 3,000

(Being first call of Rs 2 per share on 50,000 shares = Rs 1,00,000, less Rs 2,000 not received from Komal, plus Rs 3,000 being the final call amount received in advance from Kovil)

Dr. Calls-in-Arrears A/c Rs 2,000
Cr. Equity Share First Call A/c Rs 2,000

(Being first call amount of Rs 2 per share on 1,000 shares not received from Komal transferred to Calls-in-Arrears)

Exam Tip: When recording calls, separate amounts received from amounts outstanding, and track advance payments in a dedicated account.

Question 8. State any three purposes other than 'buy back of shares' for which securities premium can be utilised.
Answer: Securities Premium can be used for the following purposes:
(i) Issuing fully paid bonus shares to shareholders
(ii) Writing off preliminary expenses incurred by the company
(iii) Writing off discounts allowed on the issue of debentures

Other valid purposes include: (iv) Writing off commission paid on issue of shares or debentures, and (v) Making a contribution to the National Investment Fund as per government directives.

Exam Tip: Securities Premium uses are strictly limited by company law; always check the Companies Act for the current list of permitted uses.

Question 9. Securities premium can also be utilized for three other purposes besides (i) 'Issuing fully paid bonus shares' and (ii) 'Buy back of shares'. State those purposes.
Answer: The three other purposes for which Securities Premium can be used are:
(i) Writing off preliminary expenses of the company
(ii) Writing off discounts allowed on the issue of debentures or other debt securities
(iii) Writing off commission or brokerage paid on the issue of shares or debentures

These are provided under Section 63 of the Companies Act, 2013, which limits the use of Securities Premium Reserve to capital purposes only.

Exam Tip: Memorise the restricted list of uses for Securities Premium - examiners often test knowledge of these specific provisions.

Question 10. What is meant by 'over-subscription' of shares? With the help of an example, briefly explain the alternatives available for allotment of shares in case of over-subscription.
Answer: Over-subscription happens when applications for shares exceed the number of shares offered by the company. For example, if a company offers 10,000 shares and receives applications for 15,000 shares, this is over-subscription of 5,000 shares.

Alternatives available for allotment in case of over-subscription are:
(i) Pro-rata basis - shares are allotted to each applicant in the same proportion as applied for
(ii) Balloting method - shares are allotted by random selection through drawing of lots
(iii) First come first served - shares are allotted to applicants in the order applications are received

Example: If 10,000 shares are offered and 15,000 applied, on a pro-rata basis each applicant gets 2/3rd of applied shares (10,000 ÷ 15,000).

Exam Tip: The pro-rata method is most commonly used and treats all applicants fairly by allocating shares proportionately.

Question 11. What is meant by 'Reserve Capital'.
Answer: Reserve Capital is a portion of the company's capital that is kept aside and cannot normally be called up or demanded from shareholders during the company's regular operations. It can only be called up in the event of winding up of the company. Reserve Capital is created by capitalizing reserves built up by the company over time and serves as an additional safety margin for creditors in case of the company's liquidation.

Exam Tip: Reserve Capital is different from Reserves and Surplus - it is a special reserve kept for emergencies and liquidation only.

Question 12. Using imaginary figures, present the share capital of a company in its Balance Sheet according to the provisions of Schedule III of the Companies Act, 2013.
Answer:
Balance Sheet (Extract) of XYZ Ltd. as at 31st March, 20XX

Equity and Liabilities - Share Capital:

Authorised Capital:
50,000 Equity Shares of Rs 10 each = Rs 5,00,000

Issued Capital:
40,000 Equity Shares of Rs 10 each = Rs 4,00,000

Subscribed and Fully Paid-up Capital:
35,000 Equity Shares of Rs 10 each fully paid = Rs 3,50,000
5,000 Equity Shares of Rs 10 each, Rs 8 paid = Rs 40,000
Total Share Capital = Rs 3,90,000

Note: Called-up capital is Rs 3,90,000 and paid-up capital is Rs 3,90,000.

Exam Tip: Always follow the Schedule III format for presenting share capital - show authorized, issued, and paid-up figures separately.

Question 13. Sun Pharma Ltd. is registered with an authorized capital of Rs 1,00,00,000 divided into 1,00,000 equity shares of Rs 100 each. The company issued 50,000 shares at a premium of Rs 40 per share. A shareholder holding 500 shares did not pay the final call of Rs 20 per share. 115 shares were forfeited. Present the 'Share Capital' in the Balance Sheet of the Company as per Schedule III Part I of the Companies Act, 2013. Also prepare Notes to Accounts.
Answer:
Balance Sheet (Extract) of Sun Pharma Ltd. as at 31st March, 20XX

Equity and Liabilities:
Share Capital:
Authorised Capital: 1,00,000 shares of Rs 100 each = Rs 1,00,00,000

Issued, Subscribed and Fully Paid-up Capital:
49,885 Equity Shares of Rs 100 each fully paid = Rs 49,85,000
(50,000 shares issued less 115 shares forfeited)

Notes to Accounts:
1. Share Capital comprises equity shares only. The company has one class of shares.
2. Shares forfeited: 115 shares of Rs 100 each on which allotment money and calls were not paid.
3. Securities Premium A/c balance = 50,000 × Rs 40 = Rs 20,00,000

Exam Tip: When preparing financial statements, always show forfeited shares as a deduction from issued shares to arrive at the actual paid-up capital.

Question 14. On 1st April, 2012, Kamya Ltd. was formed with an authorised capital of Rs 40,00,000 divided into 4,00,000 equity shares of Rs 10 each. The company issued prospectus inviting applications for 3,80,000 equity shares. The company received applications for 3,60,000 equity shares. During the first year, Rs 8 per share were called up. Deepti holding 3,000 shares and Divya holding 6,000 shares did not pay first call of Rs 2 per share. Divya's shares were forfeited after the first call and later on 5,000 of the forfeited shares were re-issued at Rs 6 per share, Rs 8 called up. Show the following:
(a) 'Share Capital' in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013.
(b) Also prepare 'Notes to Accounts'.
Answer:
(a) Balance Sheet (Extract) of Kamya Ltd. as at 31st March, 2013

Equity and Liabilities:
Share Capital:
Authorised Capital: 4,00,000 shares of Rs 10 each = Rs 40,00,000

Issued and Subscribed Capital:
3,60,000 Equity Shares of Rs 10 each = Rs 36,00,000

Less: Forfeited Shares (6,000 - 5,000) = 1,000 shares
1,00,000
Net Issued Capital = Rs 35,00,000

Called-up Capital = Rs 28,00,000 (3,50,000 shares × Rs 8)
Less: Calls-in-Arrears (3,000 shares × Rs 2) = Rs 6,000
Paid-up Capital = Rs 27,94,000

(b) Notes to Accounts:
1. Share Capital comprises equity shares only
2. Number of Shares:
- Authorised: 4,00,000
- Issued: 3,60,000
- Forfeited and re-issued: 5,000\n - Outstanding forfeiture: 1,000
3. Calls in Arrears: Rs 6,000 (from Deepti - 3,000 shares × Rs 2)

Exam Tip: Always track forfeited shares carefully - show both re-issued and outstanding forfeitures in notes, and adjust the net issued capital accordingly.

Question 15. The authorised capital of Suhas Ltd. is Rs 50,00,000 divided into 25,000 shares of Rs 200 each. Out of these, the company issued 12,000 shares of Rs 200 each at a premium of 10%. The amount per share was payable as follows: Rs 60 on application Rs 60 on allotment (including premium) Rs 30 on first call and balance on final call Public applied for 11,000 shares. All the money was duly received. Prepare an extract of Balance Sheet of Suhas Ltd. as per Schedule III part I of the Companies Act, 2013 disclosing the above information. Also prepare 'Notes to Accounts' for the same.
Answer:
Balance Sheet (Extract) of Suhas Ltd. as at 31st March, 20XX

Equity and Liabilities:
Share Capital:
Authorised Capital: 25,000 shares of Rs 200 each = Rs 50,00,000

Issued, Subscribed and Fully Paid-up Capital:
12,000 Equity Shares of Rs 200 each fully paid = Rs 24,00,000

Notes to Accounts:
1. Share Capital comprises equity shares only. The company has only one class of shares.
2. Application Money received: 12,000 shares × Rs 60 = Rs 7,20,000
3. Allotment Money received: 12,000 shares × Rs 60 = Rs 7,20,000 (includes premium of Rs 12 per share)\n4. First Call Money received: 12,000 shares × Rs 30 = Rs 3,60,000
5. Final Call Money received: 12,000 shares × Rs 50 = Rs 6,00,000
6. Securities Premium Reserve: 12,000 shares × Rs 20 = Rs 2,40,000
7. Total amount received on 12,000 shares = Rs 24,40,000

Exam Tip: Identify the premium component separately and track it in the Securities Premium Reserve - this shows in the Balance Sheet as a part of Reserves and Surplus, not Share Capital.

Question 16. To provide employment to the youth and to develop Baramula district of Jammu and Kashmir, Jyoti Power Ltd. decided to set-up a power plant. For raising funds, the company decided to issue 8,50,000 equity shares of Rs 10 each at a premium of Rs 3 per share. The whole amount was payable on application. Applications for 20,00,000 shares were received. Applications for 3,00,000 shares were rejected and shares were allotted to the remaining applicants on pro-rata basis. Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal Entries in the books of Jyoti Power Ltd.

Dr. Bank A/c Rs 25,50,000
Cr. Share Capital A/c Rs 8,50,000
Cr. Securities Premium Reserve A/c Rs 2,55,000

(Being 8,50,000 equity shares of Rs 10 each at a premium of Rs 3 per share allotted and the amount received on pro-rata basis)

Details:
Total amount received = 8,50,000 shares × (Rs 10 + Rs 3) = Rs 25,50,000
Applied for: 20,00,000 shares
Rejected: 3,00,000 shares
Allotted: 17,00,000 shares on pro-rata basis
Allotted to company: 8,50,000 shares on pro-rata basis = (8,50,000 ÷ 17,00,000) × 17,00,000 = 8,50,000 shares

Exam Tip: When shares are allotted on pro-rata basis during over-subscription, calculate the proportion carefully and adjust refundable amounts for excess applications.

Question 17. Pass necessary journal entries for the following transactions in the books of Sewak Ltd.: Purchased furniture of Rs 5,00,000 from Ramprastha Ltd. The payment to Ramprastha Ltd. was made by issuing equity shares of Rs 10 each at a premium of 25%.
Answer:
Journal Entries in the books of Sewak Ltd.

Dr. Furniture A/c Rs 5,00,000
Cr. Ramprastha Ltd. A/c Rs 5,00,000

(Being furniture purchased from Ramprastha Ltd.)

Value per share including premium = Rs 10 + Rs 2.50 = Rs 12.50
Number of shares to be issued = Rs 5,00,000 ÷ Rs 12.50 = 40,000 shares

Dr. Ramprastha Ltd. A/c Rs 5,00,000
Cr. Share Capital A/c Rs 4,00,000
Cr. Securities Premium Reserve A/c Rs 1,00,000

(Being 40,000 equity shares of Rs 10 each at a premium of Rs 2.50 per share issued in payment for furniture)

Exam Tip: When shares are issued to settle liabilities, always separate the par value of shares from the premium component and credit appropriate accounts.

Question 18. Z Ltd. purchased machinery from K Ltd. Z Ltd. paid to K Ltd. as follows:
(i) By issuing 5,000, Equity shares of Rs 10 each at a premium of 30%.
(ii) By issuing 1,000, 8% Debentures of Rs 100 each at a discount of 10%.
(iii) Balance by giving a promissory note of Rs 48,000 payable after two months. Pass necessary journal entries for the purchase of machinery and payment to K Ltd.
Answer:
Journal Entries in the books of Z Ltd.

Dr. Machinery A/c Rs 2,03,000
Cr. K Ltd. A/c Rs 2,03,000

(Being machinery purchased from K Ltd.)

Calculation of Purchase Consideration:
(i) Equity Shares: 5,000 × (Rs 10 + Rs 3) = Rs 65,000
(ii) Debentures: 1,000 × Rs 100 - (1,000 × Rs 100 × 10%) = Rs 90,000
(iii) Promissory Note = Rs 48,000
Total Purchase Consideration = Rs 2,03,000

Payment Entries:

Dr. K Ltd. A/c Rs 2,03,000
Cr. Share Capital A/c Rs 50,000
Cr. Securities Premium Reserve A/c Rs 15,000
Cr. Debentures A/c Rs 1,00,000
Cr. Debentures Discount A/c Rs 10,000
Cr. Promissory Note Payable A/c Rs 48,000

(Being payment made for machinery by issuing shares, debentures and promissory note)

Exam Tip: When multiple securities are issued for purchase of assets, calculate the consideration for each component separately and record appropriately.

Question 19. X Ltd. purchased machinery for Rs 5,00,000 from Y Ltd. Half of the amount was paid by accepting a Bill of Exchange drawn by Y Ltd. payable after three months. The balance was paid by issue of Equity Shares of Rs 10 each at a premium of 25%. Pass necessary Journal Entries in the books of X Ltd. for these transactions.
Answer:
Journal Entries in the books of X Ltd.

Dr. Machinery A/c Rs 5,00,000
Cr. Y Ltd. A/c Rs 5,00,000

(Being machinery purchased from Y Ltd.)

Calculation:
Amount paid by Bill of Exchange = Rs 2,50,000
Amount paid by Equity Shares = Rs 2,50,000
Share value including premium = Rs 10 + Rs 2.50 = Rs 12.50 per share
Number of shares to be issued = Rs 2,50,000 ÷ Rs 12.50 = 20,000 shares

Dr. Y Ltd. A/c Rs 5,00,000
Cr. Bills Payable A/c Rs 2,50,000
Cr. Share Capital A/c Rs 2,00,000
Cr. Securities Premium Reserve A/c Rs 50,000

(Being payment made for machinery by accepting bill of exchange and issuing 20,000 equity shares at a premium of 25%)

Exam Tip: Always calculate the exact number of shares to be issued when payment is made by share issuance - divide the amount by the issue price (par value plus premium).

Question 20. Sandesh Ltd. took over the assets of Rs 7,00,000 and liabilities of Rs 2,00,000 from Sanchar Ltd. for a purchase consideration of Rs 4,59,500. Rs 8,500 were paid by accepting a draft in favour of Sanchar Ltd. payable after three months and the balance was paid by issue of equity shares of Rs 10 each at a premium of 10% in favour of Sanchar Ltd. Pass necessary journal entries for the above transactions in the books of Sandesh Ltd.
Answer:
Journal Entries in the books of Sandesh Ltd.

Dr. Assets A/c Rs 7,00,000
Cr. Liabilities A/c Rs 2,00,000
Cr. Sanchar Ltd. A/c Rs 5,00,000

(Being assets taken over and liabilities assumed from Sanchar Ltd.)

Net Payment due = Rs 4,59,500
Amount paid by draft = Rs 8,500
Amount paid by equity shares = Rs 4,51,000
Share value including premium = Rs 10 + Rs 1 = Rs 11 per share
Number of shares issued = Rs 4,51,000 ÷ Rs 11 = 41,000 shares

Dr. Sanchar Ltd. A/c Rs 5,00,000
Cr. Bills Payable A/c Rs 8,500
Cr. Share Capital A/c Rs 4,10,000
Cr. Securities Premium Reserve A/c Rs 41,000

(Being 41,000 equity shares at a premium of 10% and draft issued in settlement of purchase consideration)

Goodwill/Capital Reserve calculation = Rs 5,00,000 - Rs 4,59,500 = Rs 40,500 (Capital Reserve)

Exam Tip: When taking over assets and liabilities, record assets at fair value, assume liabilities at par, and adjust the difference as goodwill or capital reserve as appropriate.

Question 21. The Directors of a Company forfeited 300 shares of Rs 10 each issued at a premium of Rs 3 per share, for the non-payment of the first call money of Rs 3 per share. The final call of Rs 2 per share has not been made. Half of the shares forfeited were reissued at Rs 1,500 fully paid. Record the journal entries for the forfeiture and reissue of shares.
Answer:
Journal Entries:

Entry 1 - Forfeiture of Shares:

Dr. Share Capital A/c Rs 3,000
Dr. Securities Premium Reserve A/c Rs 900
Dr. Share Allotment Money A/c Rs 900
Cr. Share Forfeited A/c Rs 4,800

(Being 300 shares of Rs 10 each at a premium of Rs 3 per share forfeited for non-payment of first call of Rs 3 per share)

Calculation: Amount received = 300 × (Rs 10 + Rs 3) = Rs 3,900
Plus Allotment paid = 300 × Rs 0 (assumed on allotment not yet paid) = Rs 0
Total debited = Rs 3,900

Entry 2 - Reissue of Forfeited Shares:

Dr. Bank A/c Rs 7,500
Cr. Share Capital A/c Rs 1,500
Cr. Capital Reserve A/c Rs 6,000

(Being 150 forfeited shares reissued at Rs 1,500 per share fully paid up)\n\nAlternative treatment if no Capital Reserve required:
Dr. Bank A/c Rs 7,500
Cr. Share Forfeited A/c Rs 1,500
Cr. Securities Premium Reserve A/c Rs 6,000

(Being 150 forfeited shares reissued at Rs 1,500 per share)

Exam Tip: When reissuing forfeited shares at a profit, any amount received beyond the original par value can be credited to Capital Reserve or Securities Premium Reserve depending on company practice.

Question 22. L Ltd. forfeited 470 equity shares of Rs 20 each issued at a premium of Rs 3 per share for the non-payment of allotment money of Rs 8 (including premium Rs 3) and first call of Rs 5 per share. Final call of Rs 5 per share was not made. Out of these, 235 shares were reissued at Rs 19 each fully paid. Pass necessary Journal entries for the above transactions in the books of L Ltd.
Answer:
Journal Entries in the books of L Ltd.

Entry 1 - Forfeiture of Shares:

Dr. Share Capital A/c Rs 9,400
Dr. Share Application Money A/c Rs 2,350
Cr. Share Forfeited A/c Rs 11,750

(Being 470 equity shares of Rs 20 each at a premium of Rs 3 issued for forfeiture due to non-payment of allotment and first call money)

Note: Only application money received (Rs 5 per share = 470 × Rs 5 = Rs 2,350) is shown on debit side. Allotment and first call were not paid, so they are not credited back.

Entry 2 - Reissue of Forfeited Shares:

Dr. Bank A/c Rs 4,465
Cr. Share Forfeited A/c Rs 2,350
Cr. Capital Reserve A/c Rs 2,115

(Being 235 shares reissued at Rs 19 per share fully paid)

Calculation: 235 × Rs 19 = Rs 4,465
Less: Proportion of forfeited a/c = (235 ÷ 470) × Rs 11,750 = Rs 5,875
Capital Reserve = Rs 4,465 - Rs 2,350 = Rs 2,115

Or alternatively if shares reissued for entire forfeited amount:

Dr. Bank A/c Rs 4,465
Cr. Share Forfeited A/c Rs 4,465

Then Credit the balance of Share Forfeited Account to Capital Reserve = Rs 7,285

Exam Tip: When forfeiting shares, credit back only the money actually received; any loss on reissue should be transferred to Capital Reserve.

Question 23. X Ltd. invited applications for issuing 50,000 equity shares of Rs 10 each. The amount was payable as follows: On Application: Rs 2 per share On Allotment: Rs 2 per share On First Call: Rs 3 per share On Second and Final Call: Balance Amount Applications for 70,000 shares were received. Applications for 10,000 shares were rejected and the application money was refunded. Shares were allotted to the remaining applicants on a pro-rata basis and excess money received with applications was transferred towards sums due on allotment and calls, if any. Gopal, who applied for 600 shares, paid his entire share money with application. Ghosh, who had applied for 6,000 shares, failed to pay the allotment money and his shares were immediately forfeited. These forfeited shares were re-issued to Sultan for Rs 20,000; Rs 4 per share paid up. The first call money and the second and final call money was called and duly received. Pass necessary journal entries for the above transactions in the books of X Ltd. Open Calls-in-Advance Account and Calls-in-Arrears Account wherever necessary.
Answer:
Journal Entries in the books of X Ltd.

1. Application Money Received:
Dr. Bank A/c Rs 1,40,000
Cr. Application Money A/c Rs 1,40,000
(Being application money of Rs 2 per share on 70,000 shares)

2. Application Money Refund:
Dr. Application Money A/c Rs 20,000
Cr. Bank A/c Rs 20,000
(Being refund of application money on 10,000 rejected shares at Rs 2 per share)

3. Allotment of Shares:
Shares allotted to applicants = 60,000 shares
Pro-rata allotment = (50,000 ÷ 60,000) × 60,000 = 50,000 shares
Amount due on allotment = Rs 2 per share × 50,000 = Rs 1,00,000
Less: Excess received with applications
Total application received = Rs 1,40,000 - Rs 20,000 = Rs 1,20,000\nLess: Due on application (50,000 × Rs 2) = Rs 1,00,000\nExcess = Rs 20,000 (transferred to allotment)

Dr. Calls-in-Advance A/c Rs 20,000
Cr. Application Money A/c Rs 20,000
(Being excess application money transferred)

4. Recording Allotment:
Dr. Allotment Money A/c Rs 80,000
Dr. Calls-in-Advance A/c Rs 20,000
Cr. Allotment Money A/c Rs 1,00,000
(Being allotment of 50,000 shares and amount due on allotment)

Wait - restructuring the entries more clearly:

Revised Journal Entries:

1. Dr. Bank A/c Rs 1,40,000
Cr. Application Money A/c Rs 1,40,000
(Being application received on 70,000 shares)

2. Dr. Application Money A/c Rs 20,000
Cr. Bank A/c Rs 20,000
(Being refund of application on 10,000 rejected shares)

3. Dr. Allotment Money A/c Rs 80,000
Cr. Application Money A/c Rs 1,00,000
Cr. Calls-in-Advance A/c Rs 20,000\n(Being allotment of 50,000 shares; excess application money Rs 20,000 carried forward)

Note: Since Gopal paid entire amount = 600 × Rs 10 = Rs 6,000 and Ghosh failed to pay allotment, adjustments are made as:

Amount received on Allotment from Gopal and other applicants = Rs 1,00,000 - Rs 1,200 (not from Ghosh) = Rs 98,800

4. Dr. Bank A/c Rs 98,800
Cr. Allotment Money A/c Rs 98,800
(Being allotment money received)

5. Forfeiture of Ghosh's Shares (6,000 shares pro-rated to actual allotted):
Ghosh was allotted = (6,000 ÷ 60,000) × 50,000 = 5,000 shares
\n Dr. Share Capital A/c Rs 50,000
Dr. Calls-in-Advance A/c Rs 10,000\n Cr. Share Forfeited A/c Rs 60,000
(Being forfeiture of 5,000 shares of Rs 10 each - application money received Rs 10,000, allotment money not received)\n\n6. Reissue to Sultan:\n Dr. Bank A/c Rs 20,000\n Cr. Share Forfeited A/c Rs 20,000\n(Being 5,000 shares reissued to Sultan at Rs 4 per share fully paid)\n\n7. First Call and Second Call:\n Dr. Bank A/c Rs 2,50,000\n Cr. First Call A/c Rs 1,50,000\n Cr. Second and Final Call A/c Rs 1,00,000\n(Being first call of Rs 3 per share on 50,000 shares and second call of Rs 2 per share)

Share Capital and Calls Account recording would complete the entries with proper posting.

Exam Tip: In complex share issuance problems, prepare a pro-rata allocation table first and track all money movements in Application, Allotment, and Calls-in-Advance accounts separately before passing final journal entries.

Question 24. Sargam Ltd. invited applications for issuing 80,000 equity shares of Rs 100 each at a premium. The amount was payable as follows: On Application- Rs 20 per share; On Allotment- Rs 60 (including premium) per share; On First and Final Call- Rs 40 per share. Applications for 1,20,000 shares were received. Allotment was made on pro rata basis to all the applicants. Excess money received on applications was adjusted on sums due on allotment. Sitaram, who had applied for 6,000 shares, failed to pay the allotment money and Harnam did not pay first and final call on 800 shares allotted to him. The shares of Sitaram and Harnam were forfeited. 4,200 of these shares were reissued for Rs 100 per share as fully paid-up. The reissued shares included all the forfeited shares of Harnam. Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.
Answer:
Journal Entries in the books of Sargam Ltd.

1. Application Money Received:
Dr. Bank A/c Rs 24,00,000
Cr. Application Money A/c Rs 24,00,000
(Being application money at Rs 20 per share on 1,20,000 shares)

2. Allotment of Shares:
Shares allotted = (80,000 ÷ 1,20,000) × 1,20,000 = 80,000 shares
Pro-rata allotment per applicant = 2/3 of applied
Sitaram's allotment = (6,000 × 2/3) = 4,000 shares
Harnam's allotment = 800 shares (from the given information)
\n Dr. Allotment Money A/c Rs 48,00,000\n Cr. Application Money A/c Rs 16,00,000\n Cr. Allotment Money A/c Rs 32,00,000
(Being allotment of 80,000 shares at Rs 60 per share with excess application money adjusted)\n\n3. Allotment Money Received:
Dr. Bank A/c Rs 31,92,000\n Cr. Allotment Money A/c Rs 31,92,000
(Being allotment money received from all applicants except Sitaram - 4,000 shares × Rs 60 = Rs 2,40,000 not received)
\n(Alternate calculation: 80,000 × Rs 60 - Rs 2,40,000 (Sitaram) = Rs 31,92,000)

4. First and Final Call:
Dr. First and Final Call A/c Rs 32,00,000
Cr. First and Final Call Money A/c Rs 32,00,000
(Being first and final call of Rs 40 per share on 80,000 shares)
\n5. Call Money Received:\n Amount due = 80,000 × Rs 40 = Rs 32,00,000\n Less: Harnam's call on 800 shares = 800 × Rs 40 = Rs 32,000\n Amount received = Rs 31,68,000\n\n Dr. Bank A/c Rs 31,68,000
Cr. First and Final Call A/c Rs 31,68,000
(Being first and final call money received except from Harnam)

6. Forfeiture of Shares:
Sitaram's forfeited shares = 4,000 shares
Harnam's forfeited shares = 800 shares
Total forfeited = 4,800 shares
\n Dr. Share Capital A/c Rs 4,00,000
Dr. Allotment Money A/c Rs 2,40,000(Being forfeiture of 4,800 shares: Sitaram's 4,000 shares (app. Rs 80,000, allot. Rs 2,40,000 not paid) and Harnam's 800 shares (app. Rs 16,000, allot. Rs 48,000, call Rs 32,000 not paid))

7. Reissue of Forfeited Shares:
Dr. Bank A/c Rs 4,20,000
Cr. Share Forfeited A/c Rs 4,20,000
(Being 4,200 shares reissued at Rs 100 per share fully paid; includes all 800 shares of Harnam and 3,400 shares of Sitaram)

8. Completion Entry for Share Capital:
Dr. Application Money A/c Rs 16,00,000
Dr. Allotment Money A/c Rs 32,00,000\n Dr. First and Final Call A/c Rs 32,00,000
Cr. Share Capital A/c Rs 80,00,000
(Being transfer of all call money to Share Capital account for 80,000 shares of Rs 100 each)\n\nAlternatively, the full amount received can be summarized as:\n Bank received = Rs 24,00,000 + Rs 31,92,000 + Rs 31,68,000 + Rs 4,20,000 = Rs 91,80,000
Less: Excess application refund (if any) = Nil
Net received on 80,000 + 4,200 reissued = Rs 91,80,000

Exam Tip: In multi-call share issuance, maintain clear reconciliation between shares allotted, forfeited, and reissued - prepare a share movement table to track each category of shareholders separately.

Question 25. 'Sulabh Ltd.' invited applications for issuing 1,50,000 equity shares of Rs 10 each at a premium of Rs 3 per share. The amount was payable as follows: On application-Rs 2 per share. On allotment-Rs 6 per share (including premium) On first and final call-the balance. Applications for 2,00,000 shares were received and shares were allotted on pro-rata basis to all the applicants. Excess money received with applications was adjusted towards sums due on allotment. Suman who had applied for 2,000 shares failed to pay the allotment and call money. Raman failed to pay first and final call on his 500 shares. Shares of both Suman and Raman were forfeited after the final call was made. The forfeited shares were reissued for Rs 12 per share as fully paid up. Pass necessary Journal Entries for the above transactions in the books of the company.
Answer:
Journal Entries in the books of Sulabh Ltd.

1. Application Money Received:
Dr. Bank A/c Rs 4,00,000
Cr. Application Money A/c Rs 4,00,000
(Being application money at Rs 2 per share on 2,00,000 shares)

2. Pro-rata Allotment Calculation:
Shares allotted = (1,50,000 ÷ 2,00,000) × 2,00,000 = 1,50,000 shares
Pro-rata factor = 3/4 or 0.75
Suman allotted = 2,000 × 0.75 = 1,500 shares
Raman allotted = 500 shares (assumed already allocated)
\n3. Allotment of Shares:\n Amount due on allotment = 1,50,000 × Rs 6 = Rs 9,00,000
Application money received = 1,50,000 × Rs 2 = Rs 3,00,000
Excess application = Rs 4,00,000 - Rs 3,00,000 = Rs 1,00,000
Still due on allotment = Rs 9,00,000 - Rs 1,00,000 = Rs 8,00,000
\n Dr. Bank A/c Rs 8,00,000
Dr. Calls-in-Advance A/c Rs 1,00,000\n Cr. Application Money A/c Rs 3,00,000
Cr. Allotment Money A/c Rs 6,00,000
(Being allotment money received and adjustments made)
\n4. First and Final Call:
Amount due on first and final call = 1,50,000 × Rs 5 = Rs 7,50,000
Less: Suman not paying = 1,500 × Rs 5 = Rs 7,500
Less: Raman not paying = 500 × Rs 5 = Rs 2,500
Amount to be received = Rs 7,40,000\n\n Dr. Bank A/c Rs 7,40,000
Cr. First and Final Call A/c Rs 7,40,000
(Being first and final call money received)
\n5. Forfeiture of Shares:\n Total forfeited = Suman 1,500 + Raman 500 = 2,000 shares\n Amount received from Suman = 1,500 × Rs 2 (app only) = Rs 3,000
Amount received from Raman = 500 × Rs 2 (app) + 500 × Rs 6 (allot) = Rs 4,000\n\n Dr. Share Capital A/c Rs 15,00,000\n Dr. Premium on Share A/c Rs 45,000\n Cr. Share Forfeited A/c Rs 20,00,000
(Being forfeiture of 2,000 shares at Rs 10 each plus premium of Rs 3 per share)
\n6. Reissue of Forfeited Shares:\n Reissue price = Rs 12 per share fully paid
Amount received = Forfeited shares × Reissue price\n Dr. Bank A/c Rs 24,00,000
Cr. Share Forfeited A/c Rs 20,00,000
Cr. Capital Reserve A/c Rs 4,00,000
(Being reissue of forfeited shares at Rs 12 per share fully paid; profit transferred to Capital Reserve)\n\nAlternative if forfeited shares reduced to par value only:\n Dr. Bank A/c Rs 24,00,000
Cr. Share Forfeited A/c Rs 20,00,000
Cr. Capital Reserve A/c Rs 4,00,000\n\nOR (if treating reissue differently):\n Actual forfeited shares reissued = Rs 24,00,000 ÷ Rs 12 = 2,000 shares (all)
Dr. Bank A/c Rs 24,00,000
Cr. Share Capital A/c Rs 15,00,000\n Cr. Premium on Shares A/c Rs 45,000\n Cr. Capital Reserve A/c Rs 9,00,000\n\nThe correct entry is:\n Dr. Bank A/c Rs 24,00,000
Cr. Share Forfeited A/c Rs 20,00,000
Cr. Capital Reserve A/c Rs 4,00,000
(If Share Forfeited A/c contained the net balance of Rs 20,00,000)

Exam Tip: Track application, allotment, and call money separately for each category of shareholders - this helps identify who paid what and simplifies forfeiture calculations.

Question 26. 'Software Ltd.' invited applications for issuing 70,000 equity shares of Rs 10 each on which Rs 7 per share were called up, which were payable as follows: On application - Rs 2 per share On allotment - Rs 3 per share On first call - The balance The amount was received as follows: On 40,000 shares - Rs 7 per share On 20,000 shares - Rs 5 per share On 10,000 shares - Rs 2 per share The directors forfeited 30,000 shares on which less than Rs 7 per share were received. Later on the forfeited shares were reissued at Rs 5 per share, as Rs 7 per share paid up. Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal Entries in the books of Software Ltd.

1. Application and Other Money Received:
\n Group 1: 40,000 shares at Rs 7 per share\n Dr. Bank A/c Rs 2,80,000
Cr. Application Money A/c Rs 80,000
Cr. Allotment Money A/c Rs 1,20,000
Cr. First Call A/c Rs 80,000
(Being money received at full rate)
\n Group 2: 20,000 shares at Rs 5 per share\n Dr. Bank A/c Rs 1,00,000
Cr. Application Money A/c Rs 40,000
Cr. Allotment Money A/c Rs 60,000
(Being money received at Rs 5 per share; first call not paid)\n\n Group 3: 10,000 shares at Rs 2 per share\n Dr. Bank A/c Rs 20,000
Cr. Application Money A/c Rs 20,000
(Being money received at application stage only)
\n2. Total Amount Received:
Rs 2,80,000 + Rs 1,00,000 + Rs 20,000 = Rs 4,00,000\n\n3. Forfeiture of 30,000 Shares:\n 30,000 shares were forfeited on which less than Rs 7 per share were received.\n These come from Group 2 (20,000 shares @ Rs 5) and Group 3 (10,000 shares @ Rs 2)\n\n Amount received on forfeited shares = (20,000 × Rs 5) + (10,000 × Rs 2) = Rs 1,20,000
Amount due (par value) = 30,000 × Rs 7 = Rs 2,10,000
\n Dr. Share Capital A/c Rs 2,10,000
Cr. Share Forfeited A/c Rs 1,20,000
Cr. Calls-in-Arrears A/c Rs 90,000
(Being forfeiture of 30,000 shares on which only Rs 1,20,000 was received against Rs 2,10,000 due)
\n4. Reissue of Forfeited Shares:\n Reissue price = Rs 5 per share with Rs 7 per share paid up\n Amount received on reissue = 30,000 × Rs 5 = Rs 1,50,000\n\n Dr. Bank A/c Rs 1,50,000
Cr. Share Forfeited A/c Rs 1,20,000
Cr. Capital Reserve A/c Rs 30,000
(Being reissue of 30,000 shares at Rs 5 per share with Rs 7 paid-up status)\n\n5. Final Share Capital Recording:\n Total shares issued = 70,000 shares\n Shares after forfeiture and reissue = 40,000 (Group 1) + 20,000 (Group 2) - 0 (all of Group 2 not forfeited, but some forfeited) + reissued 30,000 = adjusted balance\n \n Actually, we need to recalculate:\n Group 1: 40,000 shares fully paid at Rs 7 each\n Group 2: 20,000 shares, all forfeited (part of 30,000)\n Group 3: 10,000 shares, all forfeited (part of 30,000)\n Reissued forfeited shares: 30,000\n\n Final position = 40,000 + 30,000 = 70,000 shares outstanding
\n Share Capital A/c = 70,000 × Rs 7 = Rs 4,90,000
\n Calls-in-Arrears on Group 2 and 3 (before forfeiture) would be adjusted by forfeiture

Exam Tip: When forfeiting shares in groups with different payment amounts, identify which groups are affected and calculate forfeiture amounts for each group separately.

Question 27. Moti Ltd. invited applications for issuing 10,00,000 equity shares of Rs 10 each at a premium of Rs 2 per share. The amount was payable as follows: On Application - Rs 5 (including premium) On Allotment - Rs 4 On First and Final Call - Rs 3 Applications for 15,00,000 shares were received. Applications for 3,00,000 shares were rejected and pro rata allotment was made to the remaining applicants. Excess application money was utilised towards sums due on allotment. Giri who had applied for 24,000 shares failed to pay the allotment and call money. His shares were forfeited. Out of the forfeited shares 10,000 shares were reissued for Rs 8 per share fully paid up. Pass necessary journal entries in the books of Moti Ltd.
Answer:
Journal Entries in the books of Moti Ltd.

1. Application Money Received:
Applications received for 15,00,000 shares at Rs 5 per share
Dr. Bank A/c Rs 75,00,000
Cr. Application Money A/c Rs 75,00,000
(Being application money received)
\n2. Application Money Refund:
Applications rejected for 3,00,000 shares at Rs 5 per share
Dr. Application Money A/c Rs 15,00,000
Cr. Bank A/c Rs 15,00,000
(Being refund of application money on rejected shares)
\n3. Allotment of Shares:
Shares available for allotment = 15,00,000 - 3,00,000 = 12,00,000 shares
Pro-rata allotment = (10,00,000 ÷ 12,00,000) = 5/6
Money received after rejection = Rs 75,00,000 - Rs 15,00,000 = Rs 60,00,000
This = Application on 12,00,000 × Rs 5 = Rs 60,00,000 ✓\n Amount due on allotment = 10,00,000 × Rs 4 = Rs 40,00,000\n Excess application (already included above) = Rs 60,00,000 - (10,00,000 × Rs 5) = -Rs 10,00,000\n Wait - Correction needed:\n \n Application received on 12,00,000 shares = Rs 60,00,000
Application due on 10,00,000 allotted shares = 10,00,000 × Rs 5 = Rs 50,00,000
Excess = Rs 60,00,000 - Rs 50,00,000 = Rs 10,00,000\n\n Dr. Bank A/c Rs 40,00,000\n Cr. Application Money A/c Rs 50,00,000
Cr. Calls-in-Advance A/c Rs 10,00,000\n Cr. Allotment Money A/c Rs 40,00,000
(Being allotment money received with excess application adjusted)\n\nWait, let me re-structure:\n Application money to transfer = Rs 50,00,000
Excess application (adjusted on allotment) = Rs 10,00,000\n Allotment money due = Rs 40,00,000
Less: Excess adjusted = Rs 10,00,000
Allotment money to be received in cash = Rs 30,00,000\n\n Dr. Bank A/c Rs 30,00,000
Cr. Allotment Money A/c Rs 30,00,000
(Being allotment money received)
\n Dr. Application Money A/c (transferred) Rs 50,00,000
Dr. Calls-in-Advance A/c (excess applied) Rs 10,00,000
Cr. Allotment Money A/c Rs 40,00,000
Cr. Allotment Money A/c Rs 20,00,000
\n Consolidated entry: At allotment stage:\n Giri's allotment = (24,000 ÷ 12,00,000) × 10,00,000 = 20,000 shares
\n Giri's app money = 20,000 × Rs 5 = Rs 1,00,000
\n Giri's allotment money = 20,000 × Rs 4 = Rs 80,000\n Giri did not pay allotment\n\n Other applicants' allotment money = (10,00,000 - 20,000) × Rs 4 = Rs 39,20,000\n Less: Excess app adjustment = Rs 10,00,000 (on all 10,00,000 shares pro-rated to Giri)\n Giri's share of excess = (20,000 ÷ 10,00,000) × Rs 10,00,000 = Rs 20,000\n Other's share of excess = Rs 8,00,000\n \n Other applicants' cash needed = Rs 39,20,000 - Rs 8,00,000 = Rs 31,20,000\n\n Dr. Bank A/c Rs 31,20,000
Cr. Allotment Money A/c Rs 31,20,000
(Being allotment money received from other applicants)
\n4. First and Final Call:
Amount due on first and final call = 10,00,000 × Rs 3 = Rs 30,00,000
Less: Giri's call = 20,000 × Rs 3 = Rs 60,000
Amount received = Rs 29,40,000\n\n Dr. Bank A/c Rs 29,40,000
Cr. First and Final Call A/c Rs 29,40,000
(Being first and final call received)
\n5. Forfeiture of Giri's Shares:\n Giri's shares allotted = 20,000
Amount received from Giri = Application = Rs 1,00,000
Amount due from Giri = Application (Rs 1,00,000) + Allotment (Rs 80,000) + Call (Rs 60,000) = Rs 2,40,000
\n Dr. Share Capital A/c Rs 2,00,000\n Dr. Premium on Shares A/c Rs 40,000
Cr. Share Forfeited A/c Rs 2,40,000
(Being forfeiture of 20,000 shares at Rs 10 per share including premium Rs 2)
\n6. Reissue of Forfeited Shares:\n 10,000 shares reissued at Rs 8 per share fully paid\n Amount received = 10,000 × Rs 8 = Rs 80,000\n\n Dr. Bank A/c Rs 80,000
Cr. Share Forfeited A/c Rs 1,20,000
Cr. Capital Reserve A/c Rs 40,000
(Being reissue of 10,000 shares at Rs 8 per share with full paid-up status of Rs 12)\n \n Note: Each forfeited share had credit of Rs 2,40,000 ÷ 20,000 = Rs 12 per share\n Reissue receipt = Rs 80,000 ÷ 10,000 = Rs 8 per share\n Loss on reissue = Rs 4 per share × 10,000 = Rs 40,000 (debited to Capital Reserve)\n\nActually the entry should show:\n Dr. Bank A/c Rs 80,000
Dr. Capital Reserve A/c Rs 40,000\n Cr. Share Forfeited A/c Rs 1,20,000
(Being reissue of 10,000 shares from the 20,000 forfeited shares)\n\nCorrection - the above assumes Share Forfeited A/c had a credit balance of Rs 2,40,000, and 10,000 shares get Rs 1,20,000 credit (50% of Rs 2,40,000). The balance after reissue = Rs 1,20,000.

Exam Tip: When a shareholder fails to pay both allotment and call money, debit Share Capital and Premium separately and credit Share Forfeited account with the total par value plus premium.

Question 28. Jaya Ltd. issued 60,000 shares of Rs 10 each at a premium of Rs 2 per share payable as Rs 3 on Application, Rs 5 (including premium) on allotment and the balance on first and final call. Applications were received for 82,000 shares. The Directors resolved to allot as follows: (A) Applicants of 30,000 shares 20,000 shares (B) Applicants of 50,000 shares 40,000 shares (C) Applicants of 2,000 shares Nil Ramesh who had applied for 900 shares in category (A), and Suresh who was allotted 600 shares in category (B) failed to pay the allotment money. Calculate the amount received on Allotment.
Answer:
Calculation of Amount Received on Allotment:

Step 1: Calculate Total Application Money Received
Total applications for 82,000 shares at Rs 3 per share
Total application money = Rs 82,000 × 3 = Rs 2,46,000

Step 2: Calculate Application Money to be Retained
Total shares allotted = 20,000 + 40,000 + 0 = 60,000 shares
Application money to be retained = 60,000 × Rs 3 = Rs 1,80,000

Step 3: Calculate Application Money to be Refunded
Shares rejected = 82,000 - 60,000 = 22,000 shares
Application money to be refunded = 22,000 × Rs 3 = Rs 66,000

Step 4: Calculate Allotment Money Due
Amount due on allotment = 60,000 × Rs 5 = Rs 3,00,000

Step 5: Calculate Excess Application Money (if any)
Application received on allotted shares = Rs 1,80,000
Application due on allotted shares = Rs 1,80,000\nNo excess (application money exactly matches)

Step 6: Calculate Allotment Money Received
Total allotment money due = Rs 3,00,000
Less: Not received from Ramesh (900 × Rs 5 ÷ 1,500) = (900 shares allotted for Ramesh × allotment not paid)\n\nWait - need to recalculate Ramesh's allotment:\nRamesh applied for 900 shares in category (A)\nCategory (A): 30,000 applications for 20,000 shares\nPro-rata = 20,000 ÷ 30,000 = 2/3\nRamesh's allotment = 900 × (2/3) = 600 shares\nRamesh's allotment money = 600 × Rs 5 = Rs 3,000 (not paid)\n\nSuresh's position: allotted 600 shares in category (B), did not pay allotment\nSuresh's allotment money = 600 × Rs 5 = Rs 3,000 (not paid)\n\nTotal allotment money not received = Rs 3,000 + Rs 3,000 = Rs 6,000\n\nAllotment money received = Rs 3,00,000 - Rs 6,000 = Rs 2,94,000\n\nTherefore, the amount received on Allotment = Rs 2,94,000

Exam Tip: When shares are allotted on a pro-rata basis across multiple categories, calculate each applicant's pro-rata share carefully before determining who failed to pay.

Question 29. Record the journal entries for forfeiture and reissue of shares in the following cases:
(i) X Ltd. forfeited 20 shares of Rs 10 each, Rs 7 called up on which the shareholder had paid application and allotment money of Rs 5 per share. Out of these, 15 shares were reissued to Naresh as Rs 7 per share paid up for Rs 8 per share.
(ii) Y Ltd. forfeited 90 shares of Rs 10 each, Rs 8 called up issued at a premium of Rs 2 per share to 'R' for non-payment of allotment money of Rs 5 per share (including premium). Out of these, 80 shares were reissued to Sanjay as Rs 8 called up for Rs 10 per share.
Answer:
Journal Entries:

CASE (i) - X Ltd.

Forfeiture Entry:
Amount received = 20 shares × Rs 5 = Rs 100
Amount due = 20 shares × Rs 7 = Rs 140
Loss on forfeiture = Rs 40\n\nDr. Share Capital A/c Rs 200
Cr. Share Forfeited A/c Rs 200
(Being 20 shares of Rs 10 each forfeited)\n\nReissue Entry:
Dr. Bank A/c Rs 120
Cr. Share Forfeited A/c Rs 105
Cr. Capital Reserve A/c Rs 15
(Being 15 shares reissued at Rs 8 per share with Rs 7 paid-up status)\n\nNote: Rs 100 ÷ 20 shares = Rs 5 per share received on forfeited shares\n 15 shares share of forfeiture = Rs 75 (portion of Rs 100)\n Amount received on reissue = 15 × Rs 8 = Rs 120\n Balance to Capital Reserve = Rs 120 - Rs 75 = Rs 45\n\nActually, if using the forfeited account balance:\n Share Forfeited A/c balance = Rs 200 (full par value)\n 15 shares' share = (15 ÷ 20) × Rs 200 = Rs 150\n Less: Application and allotment paid = (15 ÷ 20) × Rs 100 = Rs 75\n Net credit needed = Rs 75\n\nCorrect Reissue Entry:\nDr. Bank A/c Rs 120
Cr. Share Forfeited A/c Rs 75\n Cr. Capital Reserve A/c Rs 45
(Being 15 shares reissued to Naresh at Rs 8 per share with Rs 7 paid-up)\n\nCASE (ii) - Y Ltd.(Being 90 shares of Rs 10 each at premium of Rs 2 forfeited for non-payment of allotment of Rs 5 per share)\n\nReissue Entry:\nAmount received on reissue = 80 × Rs 10 = Rs 800\nCredit from forfeited = (80 ÷ 90) × Rs 1,080 = Rs 960\n\nDr. Bank A/c Rs 800\nDr. Capital Reserve A/c Rs 160\nCr. Share Forfeited A/c Rs 960
(Being 80 shares reissued to Sanjay at Rs 10 per share with Rs 8 called-up)\n\nNote: Loss on reissue because Rs 800 received < Rs 960 due from forfeited account, so Capital Reserve debited for Rs 160 loss.

Exam Tip: When recording reissue of forfeited shares, always compare the cash received with the book value on the forfeited shares account - the difference goes to Capital Reserve.

Question 30. SK Ltd. invited applications for issuing 3,20,000 equity shares of Rs 10 each at a premium of Rs 5 per share. The amount was payable as follows: On Application Rs 3 per share (including premium Rs 1 per share) On Allotment Rs 5 per share (including premium Rs 2 per share) On First and Final Call - Balance. Applications for 4,00,000 shares were received. Applications for 40,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received on applications was adjusted towards sums due on allotment. Jeevan holding 800 shares failed to pay the allotment money and his shares were immediately forfeited. Afterwards final call was made, Ganesh who had applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited 1,500 shares were reissued at Rs 8 per share fully paid up. The reissued shares included all the forfeited shares of Jeevan. Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal Entries in the books of SK Ltd.

1. Application Money Received:
Dr. Bank A/c Rs 12,00,000
Cr. Application Money A/c Rs 12,00,000
(Being application money of Rs 3 per share on 4,00,000 shares)
\n2. Application Money Refund:
Dr. Application Money A/c Rs 1,20,000
Cr. Bank A/c Rs 1,20,000
(Being refund of application money on 40,000 rejected shares)
\n3. Pro-rata Allotment Calculation:
Shares to allot = 3,20,000
Applications received (after rejection) = 3,60,000
Pro-rata factor = 3,20,000 ÷ 3,60,000 = 8/9\n Jeevan's allotment = 800 shares\n Ganesh's allotment = 2,700 × (8/9) = 2,400 shares\n\n4. Allotment of Shares:\n Application money received = Rs 12,00,000 - Rs 1,20,000 = Rs 10,80,000\n Application money for 3,20,000 allotted = 3,20,000 × Rs 3 = Rs 9,60,000\n Excess application = Rs 10,80,000 - Rs 9,60,000 = Rs 1,20,000\n Amount due on allotment = 3,20,000 × Rs 5 = Rs 16,00,000\n Less: Excess application adjusted = Rs 1,20,000\n Cash needed on allotment = Rs 16,00,000 - Rs 1,20,000 = Rs 14,80,000\n Less: Jeevan's allotment not paid = 800 × Rs 5 = Rs 4,000\n Cash received on allotment = Rs 14,80,000 - Rs 4,000 = Rs 14,76,000\n\n Dr. Bank A/c Rs 14,76,000
Cr. Allotment Money A/c Rs 14,76,000
(Being allotment money received from all shareholders except Jeevan)
\n5. Forfeiture of Jeevan's Shares (before final call):\n Amount received from Jeevan = 800 × Rs 3 = Rs 2,400\n Amount due = 800 × (Rs 10 + Rs 5) = Rs 12,000\n\n Dr. Share Capital A/c Rs 8,000
Dr. Premium on Shares A/c Rs 4,000
Cr. Share Forfeited A/c Rs 12,000
(Being forfeiture of 800 shares of Rs 10 each at premium of Rs 5 for non-payment of allotment)\n\n6. First and Final Call:
Amount due = 3,20,000 × Rs 2 (balance) = Rs 6,40,000
Less: Jeevan's share (already forfeited) = Rs 1,600
Less: Ganesh's call = 2,400 × Rs 2 = Rs 4,800\n Amount due from others = Rs 6,40,000 - Rs 1,600 - Rs 4,800 = Rs 6,33,600\n Amount received on first and final call = Rs 6,33,600\n\n Dr. Bank A/c Rs 6,33,600
Cr. First and Final Call A/c Rs 6,33,600
(Being first and final call received)
\n7. Forfeiture of Ganesh's Shares:\n Amount received from Ganesh = (2,400 × Rs 3) + (2,400 × Rs 5) = Rs 7,200 + Rs 12,000 = Rs 19,200\n Amount due = 2,400 × (Rs 10 + Rs 5) = Rs 36,000\n Call money not paid = 2,400 × Rs 2 = Rs 4,800\n\n Dr. Share Capital A/c Rs 24,000
Dr. Premium on Shares A/c Rs 12,000
Cr. Share Forfeited A/c Rs 36,000
(Being forfeiture of 2,400 shares of Rs 10 each at premium Rs 5 for non-payment of final call)
\n8. Reissue of Forfeited Shares:\n Total forfeited = 800 + 2,400 = 3,200 shares\n Reissued = 1,500 shares (which includes all 800 of Jeevan)\n Amount received = 1,500 × Rs 8 = Rs 12,000\n\n Share Forfeited A/c balance = Rs 12,000 (Jeevan) + Rs 36,000 (Ganesh) = Rs 48,000\n Reissued (including all of Jeevan's 800) = 800 + (1,500 - 800) = 800 + 700 from Ganesh\n\n 800 shares (Jeevan) = Rs 12,000\n 700 shares (Ganesh) = (700 ÷ 2,400) × Rs 36,000 = Rs 10,500\n Total credit = Rs 22,500\n\n Dr. Bank A/c Rs 12,000
Dr. Capital Reserve A/c Rs 10,500
Cr. Share Forfeited A/c Rs 22,500
(Being reissue of 1,500 shares at Rs 8 per share fully paid - 800 from Jeevan and 700 from Ganesh)
\n Remaining forfeited shares = 3,200 - 1,500 = 1,700 shares (700 of Ganesh + 1,000 remaining)\n Balance in Share Forfeited A/c = Rs 48,000 - Rs 22,500 = Rs 25,500

Exam Tip: When multiple shareholders have shares forfeited at different times, maintain separate accounts for each and track their pro-rata share of the forfeited account balance carefully during reissue.

Question 31. Bharat Ltd. invited applications for 40,000 Equity Shares of Rs 100 each at a premium of Rs 20 per share. The amount was payable as follows: on application Rs 30 per share on allotment (including premium) Rs 70 per share on first and final call balance of the amount Applications for 60,000 shares were received. Applications for 10,000 shares were rejected and the application money on these shares was refunded. Pro rata allotment was made to the remaining applicants and excess money received from them with applications was adjusted towards the sum due on allotment. All calls were made and were duly received except the first and final call on 500 shares allotted to Rajan. These shares were forfeited. The share forfeited were afterwards reissued for Rs 51,000 fully paid-up.
Answer:
Journal Entries in the books of Bharat Ltd.

1. Application Money Received:
Dr. Bank A/c Rs 18,00,000
Cr. Application Money A/c Rs 18,00,000
(Being application money of Rs 30 per share on 60,000 shares)
\n2. Application Money Refund:
Dr. Application Money A/c Rs 3,00,000
Cr. Bank A/c Rs 3,00,000
(Being refund of application money on 10,000 rejected shares at Rs 30 per share)
\n3. Pro-rata Allotment Calculation:\n Shares to allot = 40,000\n Applications received (net) = 50,000\n Pro-rata factor = 40,000 ÷ 50,000 = 4/5\n\n4. Allotment of Shares:\n Application money received (net) = Rs 18,00,000 - Rs 3,00,000 = Rs 15,00,000\n Application money for 40,000 shares = 40,000 × Rs 30 = Rs 12,00,000\n Excess application = Rs 15,00,000 - Rs 12,00,000 = Rs 3,00,000\n Amount due on allotment = 40,000 × Rs 70 = Rs 28,00,000\n Less: Excess application adjusted = Rs 3,00,000\n Net allotment cash due = Rs 25,00,000\n\n Dr. Bank A/c Rs 25,00,000
Cr. Allotment Money A/c Rs 25,00,000
(Being allotment money received)
\n5. First and Final Call:\n Amount due = 40,000 × Rs 20 = Rs 8,00,000\n Less: Not received from Rajan on 500 shares = 500 × Rs 20 = Rs 10,000\n Amount received = Rs 7,90,000\n\n Dr. Bank A/c Rs 7,90,000
Cr. First and Final Call A/c Rs 7,90,000
(Being first and final call money received)
\n6. Forfeiture of Rajan's Shares:\n Amount received from Rajan = (500 × Rs 30) + (500 × Rs 70) = Rs 15,000 + Rs 35,000 = Rs 50,000\n Amount due = 500 × Rs 120 = Rs 60,000\n Share value = 500 × Rs 100 = Rs 50,000\n Premium = 500 × Rs 20 = Rs 10,000\n\n Dr. Share Capital A/c Rs 50,000
Dr. Premium on Shares A/c Rs 10,000
Cr. Share Forfeited A/c Rs 60,000
(Being forfeiture of 500 shares of Rs 100 each at premium of Rs 20)
\n7. Reissue of Forfeited Shares:\n Amount received = Rs 51,000\n Credit from forfeited = Rs 60,000\n Loss on reissue = Rs 60,000 - Rs 51,000 = Rs 9,000\n\n Dr. Bank A/c Rs 51,000
Dr. Capital Reserve A/c Rs 9,000
Cr. Share Forfeited A/c Rs 60,000
(Being reissue of all 500 forfeited shares for Rs 51,000 fully paid-up)
\n\nNote: The surplus of Rs 9,000 is credited to Capital Reserve because the reissue price (Rs 51,000 ÷ 500 = Rs 102 per share) is less than the par value + premium (Rs 120 per share), making this a loss on reissue.

Exam Tip: When all forfeited shares are reissued, the entire balance of the Share Forfeited account is credited, and any loss (difference between cash received and book balance) is debited to Capital Reserve.

Question 32. S Ltd. invited applications for issuing 1,00,000 equity shares of Rs 10 each. The shares were issued at a premium of Rs 5 per share. The amount was payable as follows: On Application and Allotment – Rs 8 per share (including premium Rs 3). On the First and Final call – Balance including premium. Applications for 1,50,000 shares were received. Applications for 10,000 shares were rejected and pro-rata allotment was made to the remaining applicants on the following basis: (i) Applicants for 80,000 shares were allotted 60,000 shares, and (ii) Applicants for 60,000 shares were allotted 40,000 shares. Excess amount received on application and allotment was to be adjusted against sums due on call. X, who belonged to the first category and was allotted 300 shares, failed to pay the first and final call money. Y, who belonged to the second category and was allotted 200 shares, also failed to pay the first and final call money. Their shares were forfeited. The forfeited shares were reissued at Rs 12 per share as fully paid-up. Prepare cash book and pass necessary journal entries for the above transactions in the books of the company.
Answer: The journal entries for S Ltd. are as follows:

1. On Receipt of Application Money:
Bank A/c Dr. Rs 12,00,000 (1,50,000 shares × Rs 8)
To Application A/c

2. On Allotment (pro-rata allotment to 1,40,000 shares after rejection):
Application A/c Dr. Rs 11,20,000 (1,40,000 shares × Rs 8)
To Allotment A/c
To Capital Reserve Rs 80,000 (excess application money adjusted)

3. On First and Final Call (for 1,40,000 shares allotted):
First and Final Call A/c Dr. Rs 7,00,000 (1,40,000 shares × Rs 5 balance)
To Capital A/c

4. On Forfeiture of X's 300 shares (failed to pay first and final call):
Capital A/c Dr. Rs 2,400 (300 shares × Rs 8 paid)
Forfeited Shares A/c Dr. Rs 1,500 (300 shares × Rs 5 call money due)
To X's A/c Rs 3,900

5. On Forfeiture of Y's 200 shares (failed to pay first and final call):
Capital A/c Dr. Rs 1,600 (200 shares × Rs 8 paid)
Forfeited Shares A/c Dr. Rs 1,000 (200 shares × Rs 5 call money due)
To Y's A/c Rs 2,600

6. On Reissue of 500 forfeited shares at Rs 12 per share (fully paid):
Bank A/c Dr. Rs 6,000 (500 shares × Rs 12)
To Capital A/c Rs 6,000

In simple words: The company gets money at three stages - application, allotment, and the final call. Some money that comes in extra at application gets adjusted against money due later. When shareholders fail to pay, their shares are taken back and then sold again at a higher price, and the company gains from this reissue.

Exam Tip: Always track the pro-rata allotment carefully - the excess application money from oversubscription is adjusted against the allotment or call, not kept as separate revenue. Show forfeiture and reissue as separate entries.

Question 33. Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of Rs 10 each at a premium of Rs 2 per share. The amount was payable as follows: On application - Rs 2 per share. On allotment - Rs 5 per share (including premium). On first and final call - balance. Applications for 1,50,000 shares were received. Shares were allotted to all the applicants on pro-rata basis. Excess money received on applications was adjusted towards sums due on allotment. All calls were made. Manu who had applied for 3,000 shares failed to pay the amount due on allotment and first and final call. Madhur who was allotted 2,400 shares failed to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were reissued at Rs 9 per share as fully paid up. Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd.
Answer: The journal entries for Jeevan Dhara Ltd. are as follows:

1. On Receipt of Application Money:
Bank A/c Dr. Rs 3,00,000 (1,50,000 shares × Rs 2)
To Application A/c

2. On Pro-rata Allotment (1,20,000 shares allotted out of 1,50,000):
Allotment A/c Dr. Rs 6,00,000 (1,20,000 shares × Rs 5)
Bank A/c Dr. Rs 40,000 (excess application adjusted)
To Application A/c Rs 3,00,000
To Capital A/c Rs 3,40,000

3. On First and Final Call (Rs 5 per share - balance of Rs 12 minus Rs 7 already paid):
First and Final Call A/c Dr. Rs 6,00,000 (1,20,000 shares × Rs 5)
To Capital A/c

4. On Forfeiture of Manu's 3,000 shares (failed to pay allotment and call money):
Capital A/c Dr. Rs 21,000 (3,000 shares × Rs 7 paid on application)
Forfeited Shares A/c Dr. Rs 15,000 (3,000 shares × Rs 5 due on allotment and call)
To Manu's A/c Rs 36,000

5. On Forfeiture of Madhur's 2,400 shares (failed to pay first and final call):
Capital A/c Dr. Rs 16,800 (2,400 shares × Rs 7 paid)
Forfeited Shares A/c Dr. Rs 12,000 (2,400 shares × Rs 5 due on call)
To Madhur's A/c Rs 28,800

6. On Reissue of 5,400 forfeited shares at Rs 9 per share (fully paid):
Bank A/c Dr. Rs 48,600 (5,400 shares × Rs 9)
To Capital A/c Rs 48,600

In simple words: The company collects money in stages from shareholders. When excess application money comes in, it helps pay for the later calls. If a shareholder fails to pay, the company takes back those shares and sells them again. The gain from selling forfeited shares at a higher price than the cost gets recorded.

Exam Tip: Remember that pro-rata allotment means all applicants get shares in the same ratio. Excess application money reduces the cash need at allotment stage. Track forfeiture and reissue as separate transactions.

Question 1. The portion of the capital which can be called-up only at the time of the winding up of the company is called:
(a) Authorised Capital
(b) Uncalled Capital
(c) Reserve Capital
(d) Issued Capital
Answer: (c) Reserve Capital
In simple words: Reserve capital is the part of issued capital that the company can ask for only when it closes down. In normal times, shareholders don't need to pay this portion - it stays in reserve for emergencies.

Exam Tip: Reserve capital is a special type of uncalled capital that can be called only during winding up. Don't mix it up with reserves (profit retained by the company).

Question 2. Securities Premium Reserve can be used for:
(a) Paying interest on debentures
(b) Meeting the cost of issue of shares
(c) Paying tax liability
(d) Paying dividend on shares
Answer: (b) Meeting the cost of issue of shares
In simple words: When a company issues shares at a price higher than face value, the extra amount (premium) is kept in a special account called Securities Premium Reserve. This reserve can be used to pay the costs of issuing new shares or to make a bonus issue of shares.

Exam Tip: Securities Premium Reserve has strict rules under the Companies Act about how it can be used. It cannot be given out as dividend or used to pay tax bills.

Question 3. 8,000 shares of Rs 10 each were issued to the promoters at a premium of 10% for the services rendered by them. Give journal entry.
Answer:
Promoters' Services A/c Dr. Rs 88,000
To Capital A/c Rs 80,000
To Securities Premium Reserve A/c Rs 8,000

In simple words: The promoters gave services worth the amount of the shares they were given. Since the shares were issued at a 10% premium, the total value is Rs 88,000. The face value of Rs 80,000 goes to Capital account, and the premium of Rs 8,000 goes to Securities Premium Reserve.

Exam Tip: When shares are given for services, book them at the issue price (face value plus premium). The entire amount represents the value of services received by the company.

Question 4. Nikhil Ltd. purchased a running business from Sonia Ltd. for a sum of Rs 22,00,000 by issuing 20,000 fully paid equity shares of Rs 100 each at a premium of 10%. The assets and liabilities consisted of the following: Machinery Rs 7,00,000, Debtors Rs 2,50,000, Stock Rs 5,00,000, Building Rs 11,50,000 and Bills Payable Rs 2,50,000. Pass necessary journal entries in the books of Nikhil Ltd. for the above transactions.
Answer:
1. For recognizing assets acquired:
Machinery A/c Dr. Rs 7,00,000
Debtors A/c Dr. Rs 2,50,000
Stock A/c Dr. Rs 5,00,000
Building A/c Dr. Rs 11,50,000
To Bills Payable A/c Rs 2,50,000
To Goodwill A/c Rs 24,00,000
(Being purchase of business from Sonia Ltd.)

2. For issuing shares at premium:
Goodwill A/c Dr. Rs 24,00,000
To Capital A/c Rs 20,00,000
To Securities Premium Reserve A/c Rs 4,00,000
(Being 20,000 shares of Rs 100 each issued at 10% premium)

3. Bank Dr. (if shares are issued for cash)
Capital A/c Rs 20,00,000
Securities Premium Reserve A/c Rs 4,00,000

In simple words: When a company buys an existing business, it records all the assets and liabilities. If the price paid is more than the net assets received, the extra amount is recorded as goodwill. The purchase is paid for by issuing shares at a premium, so the capital account gets the face value and the premium goes to the Securities Premium Reserve.

Exam Tip: In business purchase questions, always find the goodwill by comparing the price paid with the net assets (assets minus liabilities). Remember that shares issued at premium have the premium amount credited to Securities Premium Reserve, not Capital.

Question 5. On 1st April, 2012, Khanna Ltd. was formed with an authorised capital of Rs 20,00,000 divided into 2,00,000 equity shares of Rs 10 each. The company issued shares inviting applications for 1,80,000 equity shares. The company received applications for 1,70,000 equity shares. During the first year, Rs 8 per share were called. Shikha holding 2,000 shares and Poonam holding 4,000 shares did not pay the first call of Rs 2 per share. Poonam's shares were forfeited after the first call and later on 3,000 of the shares forfeited were reissued at Rs 6 per share, Rs 8 called up. Show the following: (a) 'Share Capital' in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013. (b) Also prepare 'Notes to Accounts'.
Answer:
(a) Share Capital in Balance Sheet (as per Schedule III, Part I):

Authorised Capital:
2,00,000 equity shares of Rs 10 each Rs 20,00,000

Issued, Subscribed and Fully Paid-up Capital:
1,70,000 equity shares of Rs 10 each Rs 17,00,000
Less: Forfeited shares (4,000 shares) (40,000)
Add: Reissued forfeited shares (3,000 shares) 3,00,000
Net Issued Capital Rs 17,60,000

(b) Notes to Accounts:
1. Equity shares of Rs 10 each - Number of shares:
Opening balance - NIL
Issued during the year - 1,70,000
Forfeited during the year - (4,000)
Reissued during the year - 3,000
Closing balance - 1,69,000 shares

2. Amount called up and received: Rs 15,32,000 (1,69,000 shares × Rs 8 plus call arrears)

3. Calls in arrears: Rs 2,000 (from Shikha's 2,000 shares for Rs 2 first call)

In simple words: When showing share capital in the balance sheet, we display the authorized capital that was approved at formation, then show what shares were actually issued to the public. We then take out the shares that were forfeited (taken back) and add back the ones that were sold again. The notes provide details about the number of shares and how much money was actually received from shareholders.

Exam Tip: Balance sheet presentation of share capital must follow Schedule III of the Companies Act 2013. Always show authorized capital separately from issued capital. Forfeited shares reduce the issued capital until they are reissued.

Question 6. Kanshi Ltd. forfeited 10 shares of Rs 10 each at 10% premium to Ramesh (Rs 9 called up) on which he did not pay allotment money (including premium) of Rs 3 and first call of Rs 2. Out of these, 5 shares were reissued to Ganesh as fully paid up for Rs 8 per share; 3 shares to Harish as fully paid up for Rs 12 each and 2 shares to Mahesh as fully paid for Rs 6 each at different intervals of time. Give necessary journal entries.
Answer:
1. On Forfeiture of 10 shares from Ramesh:
Capital A/c Dr. Rs 90 (10 shares × Rs 9 called up)
Forfeited Shares A/c Dr. Rs 5 (10 shares × Rs 0.50 unpaid - allotment Rs 3 + call Rs 2, but only Rs 5 total due)
To Ramesh's A/c Rs 95

2. On Reissue to Ganesh (5 shares at Rs 8 per share, fully paid):
Bank A/c Dr. Rs 40
Forfeited Shares A/c Cr. Rs 45 (5 shares × Rs 9)
To Capital A/c Rs 85 (gain on reissue)

3. On Reissue to Harish (3 shares at Rs 12 per share, fully paid):
Bank A/c Dr. Rs 36
Forfeited Shares A/c Cr. Rs 27 (3 shares × Rs 9)
To Capital A/c Rs 63 (gain on reissue)

4. On Reissue to Mahesh (2 shares at Rs 6 per share, fully paid):
Bank A/c Dr. Rs 12
Capital A/c Dr. Rs 6 (loss on reissue)
To Forfeited Shares A/c Rs 18 (2 shares × Rs 9)

In simple words: When shares are forfeited, the company takes them back and can sell them again. The money the company gets from reissuing depends on the new price set. If the new price is higher than what was originally paid, the company makes a gain. If lower, it suffers a loss. Each reissue at a different price creates its own gain or loss.

Exam Tip: In forfeiture and reissue, the capital account is debited for the amount originally received from the shareholder. When reissuing, any difference between the reissue price and the original paid amount is treated as a gain (credited) or loss (debited) to capital account.

Question 7. Y Ltd. invited applications for issuing 15,000 equity shares of Rs 10 each on which Rs 6 per share were called up, which were payable as follows: On application – Rs 2 per share. On allotment – Rs 1 per share. On first call – Rs 3 per share. The issue was fully subscribed and the amount was received as follows: On 10,000 Shares – Rs 6 per share. On 3,000 Shares – Rs 3 per share. On 2,000 Shares – Rs 2 per share. The directors forfeited those shares on which less than Rs 6 per share were received. The forfeited shares were reissued at Rs 9 per share, as Rs 6 per share paid up. Pass necessary journal entries for the above transactions in the books of the company.
Answer:
1. On Receipt of Application Money:
Bank A/c Dr. Rs 30,000 (15,000 shares × Rs 2)
To Application A/c

2. On Allotment (all 15,000 shares allotted):
Allotment A/c Dr. Rs 15,000 (15,000 shares × Rs 1)
To Application A/c Rs 15,000 (transfer)
To Capital A/c Rs 30,000 (Rs 2 + Rs 1)

3. On First Call (Rs 3 per share):
Call A/c Dr. Rs 45,000 (15,000 shares × Rs 3)
To Capital A/c

4. On Cash Received:
Bank A/c Dr. Rs 60,000
To Application A/c Rs 30,000
To Allotment A/c Rs 15,000
To Call A/c Rs 15,000
(Different amounts received from different groups of shareholders)

5. Adjustment entries for amounts not received:
3,000 Shares group short of Rs 3 (received Rs 3, needed Rs 6, short Rs 3)
2,000 Shares group short of Rs 4 (received Rs 2, needed Rs 6, short Rs 4)

6. On Forfeiture of 5,000 shares (3,000 + 2,000 shares on which less than Rs 6 was received):
Capital A/c Dr. Rs 25,000 (5,000 shares × Rs 5 paid on 3,000 shares + 2,000 shares × Rs 2)
Forfeited Shares A/c Dr. Rs 10,000 (shortfall amounts)
To Shareholders' A/c Rs 35,000

7. On Reissue of 5,000 forfeited shares at Rs 9 per share (with Rs 6 paid up):
Bank A/c Dr. Rs 45,000 (5,000 shares × Rs 9)
To Capital A/c Rs 30,000 (5,000 shares × Rs 6)
To Capital Reserve Rs 15,000 (gain on reissue)

In simple words: The company calls for money in stages. When shareholders pay different amounts, the company tracks how much each group paid. Those who pay less than the required amount have their shares taken back (forfeited). The company then sells these shares again at a market price and makes or loses money based on the difference between the reissue price and what was originally received.

Exam Tip: When shareholders pay different amounts at different calls, carefully track which shareholders fall short of the required amount. Forfeiture should be for all shares where the total amount paid is below the required call level. Gains from reissue of forfeited shares may be credited to Capital Reserve depending on the company policy.

Question 8. Prayagraj Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each at a premium of Rs 10 per share. The amount was payable as follows: On Application: Rs 4 per share (including Rs 2 premium). On Allotment: Rs 5 per share (including Rs 2 premium). On First Call: Rs 5 per share (including Rs 3 premium). On Second and Final Call: Balance Amount. The issue was fully subscribed. Raghu, a shareholder holding 1000 shares, failed to pay the allotment money and Rahim, another shareholder holding 1,500 shares, paid his entire share money along with the allotment. Raghu's shares were forfeited immediately after allotment. Afterwards, the first call was made. Deenanath, a shareholder holding 500 shares, failed to pay the first call money and Dayal, a shareholder holding 600 shares, paid his second call money along with the first call. Deenanath's shares were forfeited immediately after the first call. Later on the second call was made which was duly received. Pass necessary journal entries for the above transactions in the books of Prayagraj Ltd.
Answer:
1. On Receipt of Application Money:
Bank A/c Dr. Rs 8,00,000 (2,00,000 shares × Rs 4)
To Application A/c

2. On Allotment (all 2,00,000 shares allotted):
Allotment A/c Dr. Rs 10,00,000 (2,00,000 shares × Rs 5)
To Application A/c Rs 8,00,000
To Capital A/c Rs 2,00,000

3. On Cash Received at Allotment:
Bank A/c Dr. Rs 8,50,000 (99,000 shares × Rs 5 + 1,500 shares × Rs 10 full - Raghu's 1,000 shares not paid)
To Allotment A/c

4. On Forfeiture of Raghu's 1,000 shares (failed to pay allotment of Rs 5):
Capital A/c Dr. Rs 4,000 (1,000 shares × Rs 4 paid at application)
Forfeited Shares A/c Dr. Rs 5,000 (1,000 shares × Rs 5 due at allotment)
To Raghu's A/c Rs 9,000

5. On First Call (Rs 5 per share for 1,99,000 remaining shares):
Call A/c Dr. Rs 9,95,000 (1,99,000 shares × Rs 5)
To Capital A/c

6. On Cash Received at First Call:
Bank A/c Dr. Rs 7,95,000 (less Deenanath's 500 shares unpaid and Dayal's 600 × Rs 10 includes second call)
To Call A/c

7. On Forfeiture of Deenanath's 500 shares (failed to pay first call of Rs 5):
Capital A/c Dr. Rs 4,500 (500 shares × Rs 9 paid - Rs 4 application + Rs 5 allotment)
Forfeited Shares A/c Dr. Rs 2,500 (500 shares × Rs 5 due at first call)
To Deenanath's A/c Rs 7,000

8. On Second and Final Call (Rs 3 per share, the balance of Rs 20 premium - Rs 4 - Rs 5 - Rs 5 - Rs 3 = balance):
For remaining 1,98,500 shares (2,00,000 - 1,000 forfeited - 500 forfeited):
Call A/c Dr. Rs 5,95,500 (1,98,500 shares × Rs 3)
To Capital A/c

9. On Cash Received at Second and Final Call:
Bank A/c Dr. Rs 5,95,500
To Call A/c

In simple words: A company issues shares at a premium, collecting money in four stages - application, allotment, first call, and second call. Different shareholders pay at different times. Some shareholders fail to pay at certain stages, so the company takes their shares back (forfeits them). After forfeiture, the company makes fresh calls on the remaining shareholders. The premium is divided across all four payment stages.

Exam Tip: In multi-call share issues with premium, track the premium allocation carefully across each call. When a shareholder fails to pay at any stage, record forfeiture immediately and then continue with calls on the remaining shareholders. Always separately account for shareholders who pay early or pay with later calls.

Please refer to attached file for CBSE Class 12 Accountancy Company Accounts Share Capital Assignment